This summary is based on the second quarter fiscal 2006 earnings call conducted by AT&T Inc. (T) on July 25, 2006.
Management:
CFO: Rick Lindner
IR: Rich Dietz
Key Investor Issues:
- The quarterly Cingular revenues rose 7.1% to $9.2 billion.
- The Q2 adjusted EPS increased to 58 cents from 43 cents in the year ago period.
- The company expects to buyback $2 billion to $3 billion worth of shares this year.
Second-Quarter Financial Highlights:
The Q2 total Data revenues grew 2.8% and data revenue growth has improved for five straight quarters.
- The data transport revenues increased 3.4% and this follows a 1.65% growth in Q1.
- Packet data dipped 13.2% reflecting the migration from frame relay to EBPN in managed Internet services which are part of the IP Data category.
- As a result of the migration and the strong demand, IP Data continued its double digit growth of 11.4% during the quarter.
According to the management, the Cingular AT&T Wireless merger integration is progressing well.
- Churn decreased markedly due to network service improvements and customer service enhancements.
- The total churn declined 20 basis points in each of the past three quarters down to 1.7% and post pay churn is lower at 1.5%.
- The gross additions continue to be strong.
- Since the AT&T Wireless merger six and a half quarters ago, Cingular has added 10 million subscribers while at the same time rationalizing distribution and converging networks.
- Cingular now has 92% of its customers and 98% of its minutes on the GSN Network and nearly 26 million customers have been added to the GNS Network since the merger began.
- At the start of the year, Cingular forecast to deliver upper single digit revenue growth for the year and the company has managed to do that for the first half.
- In Q2, total revenues increased 7.1% to $9.2 billion.
- The Data ARPU rose more than 38% over the past year and almost 11% sequentially.
The management announced the BellSouth acquisition agreement on March 5, 2006.
- The company has made progress in getting the various approvals.
- The stockholders of both companies voted to approve the acquisition.
- The management filed with the Department of Justice and the FCC on March 31, 2006 and the reviews are well underway.
At the time of the BellSouth agreement, the company announced the planned repurchase of $10 billion of common stock by the end of 2007.
- The management anticipates repurchasing $2 billion to $3 billion this current year.
- As a result of the pending shareholder votes to date, the repurchases have been minimal.
- An estimate $148 million of repurchases have been done in Q2.
During the quarter, the adjusted EPS was 58 cents.
- The quarterly reported EPS was 46 cents.
- The Cingular merger integration and intangible amortization costs were 5 cents.
- The costs related to the AT&T merger were 7 cents.
- About 70% of the Q2 adjustments were on-cash items.
- The adjusted EPS in Q2 of 2005 was 43 cents.
- The quarterly reported EPS was 30 cents.
- The management reported 8 cents of Cingular merger related costs and 5 cents of AT&T merger related costs which was for the termination of Will Tell contracts.
- The EPS drivers during the quarter included wireless where contributions have ramped up over the past five quarters and upside is still present.
The Q2 cash from operating activities rose 24% and the free cash flow after dividends was more than $1 billion.
