AT&T I t U d tAT&T Investor Update

3Q09 Earnings Conference Call3Q09 Earnings Conference CallOctober 22, 2009

© 2009 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Agenda

Introduction Brooks McCorcle

g

Rick Lindner

Senior Vice President-Investor Relations

ResultsSenior Executive Vice President and Chief Financial Officer

Results

Ralph de la VegaPresident and Chief Executive Officer, AT&T Mobility and Consumer Markets

Wireless & Consumer

Q and A

2

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this presentation contains fi i l ti t d th f d l ki financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future yresults is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this presentation revise statements contained in this presentation based on new information or otherwise.

This presentation may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s Web site at www.att.com/investor.relations.

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3Q09 AT&T Consolidated Financial Summary

$30 9 billi lid t d AT&T Diluted $30.9 billion consolidated revenues:

• (1.6)% versus 3Q08

• +0.4% versus 2Q09

$0.54

AT&T Diluted Earnings Per Share

$0.54$0.53

$0.41

$0.55

$

Stable consolidated operating income margin – 17.5% versus 17.9% in year-earlier quarter and in 2Q09

3Q093Q08 4Q08 1Q09 2Q09

Versus the year-earlier third quarter, 3Q09 results include $0.04 of pressure from

and in 2Q09

Strong free cash flow

• 3Q: $5.5 billion versus $4.0 billion in 3Q083Q09 results include $0.04 of pressure from

incremental noncash pension/OPEB expenses.

3Q09 EPS includes $0.03 of benefits from resolution of tax issues, offset by $0.02 of pressure due to severance charges.

$ Q

• YTD: $13.9 billion versus $7.9 billion in first three quarters of 2008

4 Free Cash Flow is defined as cash from operations less capital expenditures.

AT&T 3Q09 HighlightsQ g g

• 2.0 million total wireless net subscriber additionswith record-low churn

• 4.3 million postpaid 3G integrated devices added to network, best-ever quarterly total

• 3.8% increase in postpaid ARPU with % l h d b 33 6% h

Solid execution

across the business, 1.7% sequential growth, driven by 33.6% growth in wireless data revenues

• 38.5% wireless OIBDA service margin, up sequentially and year over year

good momentum

in key growth areas,

sharp focus on cost sequentially and year over year

• 240,000 AT&T U-verseSM TV net adds, up from 232,000 in 3Q08, to reach 1.8 million

16 6% strategic business services revenue growth

p

improvement

• 16.6% strategic business services revenue growthwith business IP-based revenues up 6.8%

• $13.9 billion free cash year to date versus $7.9 billion over first three quarters of 2008

5

$ q

OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.Free Cash Flow is defined as cash from operations less capital expenditures.

Consolidated Revenue Trends

Consolidated revenues declined 1.6% versus peak level in 3Q08,

AT&T Consolidated Revenues($ in billions) p Q ,

with second consecutive quarter of sequential improvement

Wireless Services 3.5% 10.0%

$30.9$31.3 $31.1 $30.7$30.6

Sequential YOY

e ess Se ces 3 5% 0 0%

Wireline Data 2.0% 5.4%

Wireline IP Data 4.7% 18.7%2Q09 3Q093Q08 4Q08 1Q09

3Q09 Revenue Mix

Wireless, 100% owned 44%

Wireline Data/d

Diversified revenue mix increasingly weighted to wireless

Wireline Voice (3.8)% (14.5)%

Managed Services 24%

Wireline Voice 26%

Advertising Solutions/Other 6%

g y gand data/managed services:

• 68% of revenues in 3Q09

• 58% of revenues in 3Q07

6

3Q09 Highlights: Rapid Transformation of AT&T Mobility and Consumer Business

Clear benefits from integrated device strategy and aggressive expansion of wireless data network capabilitiesexpansion of wireless data network capabilities

• Strong subscriber gains • Best-ever integrated device quarter• High-quality, data-centric base

Record low churn• Record-low churn• Accelerated ARPU growth• Robust wireless data growth

G d t i i d i R d b k Good momentum in emerging devices – eReaders, netbooks, navigation services, monitoring devices and more

Wireless network initiatives on track – HSPA 7.2 significantly i i l d t d fi t k t l h l d thi increases wireless data speeds, first market launches planned this year

AT&T U-verse redefining consumer space – more than three-fourths of U-verse TV subscribers have a triple- or quad-play, improved customer retention ARPU growth

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customer retention, ARPU growth

Strong Wireless Subscriber Gains, Accelerated Service Revenue Growth

AT&T Wireless Service Revenues($ in billions) $ 2($ in billions) $12.4

$11.5 $11.7$12.0

$11.3

10.0% year-over-year wireless service revenue growth• Up from 9.4% growth in 2Q09

3 5% sequential growth

Best-ever third-quarter total subscriber gain of 2.0 million; 6 7 million increase over

2Q09 3Q093Q08 4Q08 1Q09

• 3.5% sequential growth

6.7 million increase over past year

1.4 million retail postpaid net adds

81.6

77.078.2

79.6

AT&T Wireless Subscribers(in millions)

net adds• Up 20% from 2Q09• Second-highest third-quarter

total in company history

74.9

2Q09 3Q093Q08 4Q08 1Q09

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2Q09 3Q093Q08 4Q08 1Q09

Record-Low Subscriber Churn, Significant Step Up In ARPU

TotalSubscriber ARPU

Postpaid Subscriber ARPUSubscriber ARPU

$51.21$58.99

• Seventh straight quarter of year over year postpaid ARPU

$61.23

Subscriber ARPU

$50.80

3.8% year-over-year postpaid ARPU growth:

3Q08

year-over-year postpaid ARPU growth

• 1.7% sequential growth3Q09 3Q08 3Q09

TotalChurn

1.69%1.22%

1.43%1 17%

Postpaid Churn

• Best-ever total churn – down >25 basis points year over year

Substantial year-over-year churn improvement:

1.17% >25 basis points year over year• Best-ever third-quarter postpaid

churn, in some markets well below 1%

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3Q09 3Q093Q083Q08

Strength in Integrated Devices,33.6% Wireless Data Revenue Growth

Independent data shows Wireless Data Postpaid

• 4.3 million increase in postpaid

ptwice as many smartphone customers have chosen AT&T over any other competitor

Wireless Data Revenues($ in billions)

Postpaid Subscribers with Integrated Devices

41.7%Postpaid Data ARPU

$3.6p p

3G integrated devices, highest quarterly gain to date

• >26 million integrated devices in service, doubled over past year$2.7

$18.37

, p y

• >53% of postpaid subs now have data plans

• 3.2 million iPhone activations, b t t t l

22.3%

best-ever total

• NPV for iPhone subs >2X average postpaid sub

3Q08 3Q09 3Q093Q08

$14.70

10

Leadership in Emerging Devices,Next Wave of Wireless Growth

eReaders • Kindle from Amazon comeReaders • Kindle from Amazon.com

• Sony Daily Edition

• Plastic Logic QUETM

• Barnes and Noble nook

Personal Navigation Devices

• Barnes and Noble nook

• TomTom XL 340S LIVE

• Garmin Nuvi 1690Devices

NokiaNetbooks A• Nokia

• Dell

Netbooks • Acer

• Lenovo

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Wireless Network Initiatives on Track, Delivering Benefits for Customers

3G dropped calls improved 12% over past year, approaching 1%; 3G blocked calls improved 30%

Composite Quality Index improved >25% over past 10 months

Percentage of 3G blocked calls

Percentage of 3G dropped calls

2%

past 10 months

S 08 S 09 N 08 S 09Sept 08 Sept 09 Sept 08 Sept 09 Nov 08 Sept 09

• ~2,000 new cell sites

2009 initiatives on schedule:

• ~100,000 new circuits for backhaul – doubling number of fiber-served cell sites

• 3G expansion to ~4,400 sites, covering more than 370 markets by end of year

• 850 MHz spectrum conversion to 3G >90% complete, in final city by end of 2009

• Wi-Fi connections up 4X over 3Q08 – >20,000 U.S. hotspots, 125,000 globally

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Wi Fi connections up 4X over 3Q08 >20,000 U.S. hotspots, 125,000 globallyComposite Quality Index is an overall view of 3G network performance that measures call success as well as our customers’ ability to access and remain on AT&T’s 3G network.

Next Major Wireless Network Deployments: HSPA 7.2 and LTE (4G)

HSPA 7.2 platform is ready now, d bl th ti l d f 3GPlanned HSPA 7.2

Launches in 4Q09

• Chicago• Houston

• Charlotte• Dallas

doubles theoretical speed for 3G• Six 7.2-compatible handsets

available in 4Q, more to come

• Provides better default speeds, bette c stome e pe ience d ing • Miami• Los Angeles

Plan to deploy HSPA 7.2 in 25 of 30 top markets by

better customer experience during transition to 4G

• Efficient deployment path to 4G

LTE 4G deployment in 25 of 30 top markets by the end of 2Q10

Expect to cover ~90%

LTE 4G deployment • Plan trials in 2010, expect to begin

deployment in 2011

• AT&T has impressive inventory of 700 MHz and AWS spectrum p

of 3G POPs with HSPA 7.2 by end of 2011

of 700 MHz and AWS spectrum dedicated exclusively for LTE

• This spectrum will cover 100% of the top 200 U.S. markets

13

Wireless Margin Expansiong p

AT&T Wireless OIBDA Service Margin

Wireless OIBDA service margin up sequentially and year over year, driven by:

38 5%38 3%

Mid-40% Range

• Strong revenue growth

• High-quality subscriber base

• Continuing operational

38.5%

33.5%

38.3%

Continuing operational improvements in network and support functions

Trends reinforce confidence

Longer-term expectation

3Q08 3Q092Q09

in longer-term margin target

14 OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.

AT&T U-verse Innovation and Growth

AT&T U-verse’s broadband attach rate continues to run above 90%, VoIP attach rate above 60%

AT&T U-verse TV ranked “Highest in Residential Television Service Satisfaction in the

• >75% of U-verse subscribers have a triple- or quad-play

• U-verse TV penetration above 12% companywide and above 20% overall in areas marketed to for 24+ months

Service Satisfaction in the South and West Regions Two Years in a Row” by J.D. Power and Associates

in areas marketed to for 24+ months

• Continue to roll out new features including Multiview:

AT&T U-verse TV Subscribers(in thousands)

U-verse VoIP Subscribers

1,329

1,817

1,577735

781

,

1,045

394

224

570

4Q083Q08

104

1Q09 2Q09 3Q09

15

AT&T U-verse received the highest numerical score among television service providers in the South and West in the proprietary J.D. Power and Associates 2008-2009 Residential Television Service Satisfaction StudiesSM. 2009 study based on 28,118 total responses from measuring providers in the South (13) and West (10) regions and measures consumer satisfaction with television service. Proprietary study results are based on experiences and perceptions of consumers surveyed in January, March and June 2009. Your experiences may vary. Visit jdpower.com

AT&T U-verse Driving Directional

32.1% year-over-year growth in

Improvement in Wireline Consumer Trends

Change in Regional revenues from consumer IP-based services, U-verse services and broadband. Key drivers:

Change in Regional Consumer Connections(in thousands)

Regional Consumer Revenue Per Household Served

$65.26 YOY Change

U-verse TV subscribers >1 million

U-verse VoIP connections 631,000

3Q093Q08

$63.68

$65.26 O C a ge

Consumer wireline broadband connections 821,000

(630) IP-based services – broadband, VoIP

3Q08 3Q09(869)

,and AT&T U-verse TV – represented 32.4% of 3Q09 total wireline consumer revenues – up from 23.2% 3Q08

16

AT&T Business Solutions

AT&T Business Solutions Revenues($ in billions)

Fundamental business trends consistent with 1H09: strong growth in IP data and strategic

Year-Over-Year Change

Sequential Change

Total (1.3)% (7.6)%

Services (excludes CPE) (1.3)% (6.4)%

IP Data 3.1% 6.8%

growth in IP data and strategic services offset by economic pressures

• Strategic business services revenue growth led by Ethernet

Year ChangeChange

Strategic Services 5.2% 16.6%revenue growth led by Ethernet and VPNs, both up ~20% year over year

• Largest economic impacts on volumes in voice and legacy

$1,058Strategic Business Services Revenues

volumes in voice and legacy data products

• Operational cost efficiencies continue to support business margins

$907

($ in millions)$969

$1,006

$941

margins

• Expect year-over-year business revenue comparisons will flatten/improve in 4Q09

2Q09 3Q093Q08 4Q08 1Q09Strategic business services include the new-generation capabilities that lead AT&T’s most advanced solutions – including Ethernet, VPNs, hosting,

17

g , , g,IP conferencing and application services.

Stable Consolidated Marginsg

Margins reflect continued sharp focus on di i li i l i

AT&T Consolidated Operating Income Margin cost discipline, operational improvements

in both wireless and wireline18.6%

Operating Income Margin

18.0% • 3Q consolidated operating expenses down 1.0% year over year

M j t i iti ti t k

• Wireline operating expenses down 2.8% year over year

Major cost initiatives on track:

• Total force down ~18,000 year to date

• Continuing cost-improvement opportunities, including areas such as

Full-Year2008

YTD3Q09

organizational and systems integration, order and billing center consolidation

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Strong Cash Flow, Balance Sheet StrengthStrong Cash Flow, Balance Sheet Strength

AT&T Cash Flow($ in billions) 3Q09 YTD Cash Profile

Cash From OperatingActivities

($ )

$25 5

Free Cash Flow

$13 9

Cash from Operating Activities $25.5

Capital Expenditures $11.6

3Q09 YTD Cash Profile

$22.8

$25.5 $13.9

Free Cash Flow $13.9

Dividends Paid $7.3

• Total debt reduced by $4.1 billion in 3Q09

$7.9Debt Reductions

• Debt net of cash on hand reduced by $12.0 billion over the past five quartersYTD

3Q09 YTD3Q08

YTD3Q09

YTD3Q08

19 Free Cash Flow is defined as cash from operations less capital expenditures.

3Q09 Summary: Solid Execution, Good Momentum in Key Growth Areas

• Strong wireless growth – 10.0% increase in service revenues,significant step up in postpaid ARPU, record-low churn

• Wireless margin expansion – driven by high-quality subscriber base, operational improvements

• Wireless network initiatives on track – initial HSPA 7.2 market launches in 4Q, natural progression to LTE/4G

• Solid U-verse growth – high broadband and voice attach rates• Solid U verse growth high broadband and voice attach rates

• Continued growth in advanced business services – up 16.6%

• Stable margins – cost discipline across operations, wireline operating expenses down

• Strong free cash flow – with sound balance sheet, improving credit metrics

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AT&T I U dAT&T Investor Update

3Q09 Earnings Conference Call3Q09 Earnings Conference CallOctober 22, 2009

© 2009 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.