This summary is based on the fourth quarter fiscal 2006 earnings call conducted by AT&T Inc. (T: chart) on January 25, 2007.

Management:

Chairman and CEO: Ed Whitacre
CFO: Rick Lindner
SVP of Finance, Southeast Region: Ray Winborne
IR: Rich Dietz

Key Investor Issues:

- Full year adjusted EPS was up 36% versus 2005.
- Adjusted Q4 operating income margin was 18.2%, an increase of 190 basis points from a year ago quarter.
- The management plans to return $7 billion to shareholders through share repurchases in 2007.

Fourth-Quarter Financial Highlights:

The management reported that the BellSouth merger closed on December 29, 2006.

- The quarterly results include just two days from BellSouth operations and two days of Cingular results reflecting the company’s 100% post merger ownership.
- The impact of those days on the reported and adjusted Q4 EPS was immaterial.
- BellSouth’s operating results for the two days after the merger close were included in the other segment.
- The management has raised its outlook for BellSouth merger synergies from the earlier forecast of $18 billion to $23 billion.

- The small business revenues grew 9.1% and large businesses revenues rose 3%.
- The consumer revenue was down less than 1% due to the discontinuation of DSL regulatory cost recovery fees.
- The wholesales revenue dipped 4.6% due to the declines in UNEP lines.

- The revenues in the advertising and publishing segment grew 8.9% or 5.7% when adjusted for last year’s Katrina credits.
- The electronic media sales growth of more than 40%, as well as stable print revenue contributed to these results.
- BellSouth’s advertising and publishing operating margin firmed to 48.3%.
- For the full year, BellSouth generated free cash flow of $3.7 billion.
- The cash flow after dividends was $1.6 billion.

- At the BellSouth communications group, data revenues rose 5.8% driven by DSL, emerging data products and wireless transport.
- The DSL lines increased 26% with a 183,000 added during the quarter.
- The DSL revenues grew 17% due to increased customers and a positive mix shift to 3mega and higher-speed products.
- During the quarter, BellSouth maintained a strong margin of 25.7%, an increase of 380 basis points on a year-on-year basis.
- An estimated 140 basis points of the year-over-year improvement is attributable to lessened storm activity in 2006.
- Beyond that, margin expansion was helped by greater scale in broadband data and long-distance services coupled with year-over-year cost reductions.

The quarterly adjusted EPS was 61 cents and reported EPS was 50 cents.

- The management reported that adding back 5 cents of Cingular merger costs, another 5 cents of AT&T merger costs and 1 cent of initial BellSouth merger integration costs results in an adjusted EPS of 61 cents.
- In the fourth quarter of 2005, reported EPS was 46 cents.
- Adding back 8 cents of Cingular merger and storm related costs, 16 cents of AT&T merger costs, 2 cents of non-merger severance and a gain of 25 cents from 2005 tax settlements results in adjusted EPS of 48 cents.

- The EPS drivers include wireless where revenue growth is accelerating and margins continue to ramp up.
- The second driver is wireline where solid results from merger integration have driven margin expansion.

The $10 billion share repurchase plan is on track for completion by the end of the year.

- The company repurchased $1.3 billion worth of its shares in Q4, bringing the full year total to $2.7 billion.
- The company remains with a balance of more than $7 billion in repurchase in 2007.
- In December, the company increased the dividend by 6.8% and that’s doubled the increase of the past few years.

The management highlighted the five operational priorities for the remainder of the year.

- The first priority relates to strengthening the company’s lead in wireless, including further margin expansion.
- Upon acquisition of AT&T two years back, management emphasized the goal of building the best wireless company in the business.
- The company is an industry leader in wireless flow share and other leading companies are benchmarking against the company.

- The second priority is to lead in business and return enterprise to top-line growth.
- The management is expanding its reaching capabilities.

- The third priority relates to strengthening the company’s position as provider of choice for smaller and medium business customers.
- Over the past year, the management has accelerated revenue growth rates into double-digits.