AT&T (T) 8-K Substantial Margin Expansion, Record Gain in DSL Lines, Double-Digit

Financial Data

SBC Communications Inc.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited Three Months Ended Nine Months Ended

9/30/05 9/30/04 % Chg 9/30/05 9/30/04 % Chg

Operating Revenues
Voice	$	4,929		$	5,286	-6.8	%	$	14,989	$	15,704	-4.6	%
Data		3,009			2,733	10.1	%		8,830		8,107	8.9	%
Long-distance voice		949			865	9.7	%		2,772		2,429	14.1	%
Directory advertising		961			948	1.4	%		2,856		2,869	-0.5	%
Other		472			460	2.6	%		1,449		1,391	4.2	%
Total Operating Revenues		10,320			10,292	0.3	%		30,896		30,500	1.3	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,352			4,319	0.8	%		13,176		12,902	2.1	%
Selling, general and administrative		2,203			2,386	-7.7	%		7,247		7,244	-
Depreciation and amortization		1,803			1,889	-4.6	%		5,437		5,700	-4.6	%
Total Operating Expenses		8,358			8,594	-2.7	%		25,860		25,846	0.1	%
Operating Income		1,962			1,698	15.5	%		5,036		4,654	8.2	%
Interest Expense		349			238	46.6	%		1,051		705	49.1	%
Interest Income		82			140	-41.4	%		291		376	-22.6	%
Equity in Net Income of Affiliates		219			210	4.3	%		342		1,171	-70.8	%
Other Income (Expense) - net		(70	)		45	-			11		862	-98.7	%
Income Before Income Taxes		1,844			1,855	-0.6	%		4,629		6,358	-27.2	%
Income Taxes		598			610	-2.0	%		1,498		2,067	-27.5	%
Income From Continuing Operations		1,246			1,245	0.1	%		3,131		4,291	-27.0	%
Income From Discontinued Operations, net of tax		-			849	-			-		908	-
Net Income	$	1,246		$	2,094	-40.5	%	$	3,131	$	5,199	-39.8	%
Basic Earnings Per Share:
Income from Continuing Operations	$	0.38		$	0.38	-		$	0.95	$	1.30	-26.9	%
Net Income	$	0.38		$	0.63	-39.7	%	$	0.95	$	1.57	-39.5	%
Weighted Average Common
Shares Outstanding (000,000)		3,296			3,314	-0.5	%		3,300		3,311	-0.3	%
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.38		$	0.38	-		$	0.95	$	1.29	-26.4	%
Net Income	$	0.38		$	0.63	-39.7	%	$	0.95	$	1.57	-39.5	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		3,306			3,325	-0.6	%		3,311		3,324	-0.4	%

Financial Data

SBC Communications Inc.

Statements of Segment Income

Dollars in millions

Unaudited

Three Months Ended Nine Months Ended

Wireline		9/30/05		9/30/04	% Ch	g		9/30/05		9/30/04	% Ch	g
Segment Operating Revenues
Voice	$	4,929	$	5,286	-6.8	%	$	14,989	$	15,704	-4.6	%
Data		3,009		2,733	10.1	%		8,830		8,107	8.9	%
Long-distance voice		949		865	9.7	%		2,772		2,429	14.1	%
Other		465		430	8.1	%		1,427		1,341	6.4	%
Total Segment Operating Revenues		9,352		9,314	0.4	%		28,018		27,581	1.6	%
Segment Operating Expenses
Cost of sales		4,098		4,090	0.2	%		12,418		12,202	1.8	%
Selling, general and administrative
Selling		1,531		1,633	-6.2	%		4,774		4,940	-3.4	%
General and administrative		477		645	-26.0	%		1,950		1,839	6.0	%
Selling, general and administrative		2,008		2,278	-11.9	%		6,724		6,779	-0.8	%
Depreciation and amortization		1,775		1,857	-4.4	%		5,355		5,618	-4.7	%
Total Segment Operating Expenses		7,881		8,225	-4.2	%		24,497		24,599	-0.4	%
Segment Income	$	1,471	$	1,089	35.1	%	$	3,521	$	2,982	18.1	%

Cingular *
Segment Operating Revenues
Service revenues	$	7,721		$	3,873		-		$	22,859		$	11,289		-
Equipment sales		1,025			419		-			2,725			1,157		-
Total Segment Operating Revenues		8,746			4,292		-			25,584			12,446		-
Segment Operating Expenses
Cost of services and equipment sales		3,667			1,692		-			10,629			4,672		-
Selling, general and administrative		2,881			1,567		-			8,835			4,402		-
Depreciation and amortization		1,541			573		-			4,845			1,691		-
Total Segment Operating Expenses		8,089			3,832		-			24,309			10,765		-
Segment Operating Income		657			460		42.8	%		1,275			1,681		-24.2	%
Other Income (Expense) - Net		(331	)		(318	)	-4.1	%		(996	)		(981	)	-1.5	%
Segment Income	$	326		$	142		-		$	279		$	700		-60.1	%

^*  Results reflect 100% of Cingular Wireless’ actual results

Directory
Segment Operating Revenues	$	932	$	935	-0.3	%	$	2,786		$	2,806	-0.7	%
Segment Operating Expenses
Cost of sales		271		251	8.0	%		826			764	8.1	%
Selling, general and administrative
Selling		64		35	82.9	%		192			153	25.5	%
General and administrative		90		95	-5.3	%		283			294	-3.7	%
Selling, general and administrative		154		130	18.5	%		475			447	6.3	%
Depreciation and amortization		1		2	-50.0	%		4			7	-42.9	%
Total Segment Operating Expenses		426		383	11.2	%		1,305			1,218	7.1	%
Segment Operating Income		506		552	-8.3	%		1,481			1,588	-6.7	%
Equity in Net Income (Loss) of Affiliates		-		-	-			(1	)		-	-
Segment Income	$	506	$	552	-8.3	%	$	1,480		$	1,588	-6.8	%

International
Segment Operating Revenues	$	3	$	6	-50.0%	$	8		$	17		-52.9%
Segment Operating Expenses		2		1	-		13			19		-31.6%
Segment Operating Income (Loss)		1		5	-80.0%		(5	)		(2	)	-
Equity in Net Income of Affiliates		85		112	-24.1%		247			713		-65.4%
Segment Income	$	86	$	117	-26.5%	$	242		$	711		-66.0%

Financial Data

SBC Communications Inc.

Consolidated Balance Sheets

Dollars in millions except per share amounts 09/30/05 12/31/04

Unaudited

Assets
Current Assets
Cash and cash equivalents	$	433		$	760
Accounts receivable - net of allowances for
uncollectibles of $832 and $881		5,229			5,480
Prepaid expenses		1,132			746
Deferred income taxes		555			566
Other current assets		753			989
Total current assets		8,102			8,541
Property, plant and equipment - at cost		138,139			136,177
Less: accumulated depreciation and amortization		89,699			86,131
Property, Plant and Equipment - Net		48,440			50,046
Goodwill		1,723			1,625
Investments in Equity Affiliates		1,828			1,798
Investments in and Advances to Cingular Wireless		31,117			33,687
Other Assets		12,894			13,147
Total Assets	$	104,104		$	108,844
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	5,386		$	5,734
Accounts payable and accrued liabilities		9,205			10,038
Accrued taxes		2,645			1,787
Dividends payable		1,060			1,065
Liabilities of discontinued operations		-			310
Total current liabilities		18,296			18,934
Long-Term Debt		17,822			21,231
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		14,941			15,621
Postemployment benefit obligation		9,340			9,076
Unamortized investment tax credits		171			188
Other noncurrent liabilities		3,355			3,290
Total deferred credits and other noncurrent liabilities		27,807			28,175
Stockholders' Equity
Common shares issued ($1 par value)		3,433			3,433
Capital in excess of par value		13,001			13,350
Retained earnings		28,742			28,806
Treasury shares (at cost)		(4,418	)		(4,535	)
Additional minimum pension liability adjustment		(190	)		(190	)
Accumulated other comprehensive income		(389	)		(360	)
Total stockholders' equity		40,179			40,504
Total Liabilities and Stockholders' Equity	$	104,104		$	108,844

Financial Data

SBC Communications Inc.

Consolidated Statements of Cash Flows

Dollars in millions, increase (decrease) in cash and cash equivalents

Unaudited Nine Months Ended

9/30/05 9/30/04

Operating Activities
Net income	$	3,131		$	5,199
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		5,437			5,700
Undistributed earnings from investments in equity affiliates		(285	)		(856	)
Provision for uncollectible accounts		561			549
Amortization of investment tax credits		(17	)		(22	)
Deferred income tax (benefit) expense		(315	)		1,596
Net gain on sales of investments and property		(104	)		(900	)
Income from discontinued operations, net of tax		-			(908	)
Retirement benefit funding		-			(2,232	)
Changes in operating assets and liabilities:
Accounts receivable		(309	)		(75	)
Other current assets		(249	)		5
Accounts payable and accrued liabilities		73			(1,104	)
Stock-based compensation tax benefit		(3	)		(2	)
Other - net		463			583
Total adjustments		5,252			2,334
Net Cash Provided by Operating Activities		8,383			7,533
Investing Activities
Construction and capital expenditures		(3,743	)		(3,462	)
Receipts from (investments in) affiliates - net		2,603			-
Purchases of held-to-maturity securities		-			(134	)
Maturities of held-to-maturity securities		98			393
Dispositions		126			5,283
Acquisitions		(169	)		(9	)
Proceeds from note repayment		37			50
Net Cash (Used in) Provided by Investing Activities		(1,048	)		2,121
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		(1,656	)		(610	)
Issuance of long-term debt		-			1,487
Repayment of long-term debt		(2,123	)		(623	)
Purchase of treasury shares		(742	)		-
Issuance of treasury shares		362			151
Dividends paid		(3,196	)		(3,105	)
Stock-based compensation tax benefit		3			2
Net Cash Used in Financing Activities		(7,352	)		(2,698	)
Net increase (decrease) in cash and cash equivalents
from continuing operations		(17	)		6,956
Net increase (decrease) in cash and cash equivalents
from discontinued operations		(310	)		1,528
Net increase (decrease) in cash and cash equivalents		(327	)		8,484
Cash and cash equivalents beginning of year		760			4,806
Cash and Cash Equivalents End of Period	$	433		$	13,290

Financial Data

SBC Communications Inc.

Supplementary Operating Data

Dollars in millions except per share amounts

Unaudited Three Months Ended Nine Months Ended

9/30/05 9/30/04 9/30/05 9/30/04

Switched Access Lines (000)
Retail Consumer - Primary					22,922		23,279
Retail Consumer - Additional					3,989		4,441
Retail Business					17,511		17,626
Retail					44,422		45,346
UNE-P					4,803		6,782
Resale					620		368
Wholesale					5,423		7,150
Coin 1					372		440
Total Switched Access Lines (000)					50,217		52,936
Unbundled Loops (000)					1,598		1,558
Long Distance Lines in Service (000)					23,330		19,763
DSL Lines in Service (000)					6,496		4,679
Net DSL Line Additions (000)	528		402		1,392		1,164
Video Subscribers (000)					419		226
Net Video Subscriber Additions (000)	15		105		95		226
Cingular Wireless (2)
Wireless Voice Customers (000)					52,292		25,672
Net Customer Additions (000)	867		657		3,186		1,639
M&A Activity, Partitioned Customers and Other Adjs.	(17	)	(29	)	(26	)	6
POPs (000,000)					294		243

¹  Coin includes both retail and wholesale access lines.
²  Amounts represent 100% results of Cingular Wireless.

Non-GAAP Financial Data

SBC Communications Inc.

Supplemental Consolidated Income Statements

Dollars in millions

Unaudited

Three Months Ended Nine Months Ended

		9/30/05			9/30/04		% Ch	g		9/30/05			9/30/04		% Ch	g
Total Operating Revenues	$	18,846		$	14,433		30.6	%	$	55,873		$	42,510		31.4	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		7,799			5,860		33.1	%		23,198			17,122		35.5	%
Selling, general and administrative		5,084			3,953		28.6	%		16,082			11,645		38.1	%
Depreciation and amortization		3,344			2,461		35.9	%		10,282			7,389		39.2	%
Total Operating Expenses		16,227			12,274		32.2	%		49,562			36,156		37.1	%
Operating Income		2,619			2,159		21.3	%		6,311			6,354		-0.7	%
Interest Expense		582			348		67.2	%		1,768			1,036		70.7	%
Interest Income		19			51		-62.7	%		84			113		-25.7	%
Minority Interest		(168	)		(78	)	-			(208	)		(379	)	45.1	%
Equity in Net Income (Loss) of Affiliates		87			27		-			269			444		-39.4	%
Other Income (Expense) - Net		(68	)		44		-			31			864		-96.4	%
Income Before Income Taxes		1,907			1,855		2.8	%		4,719			6,360		-25.8	%
Income Taxes		661			610		8.4	%		1,588			2,069		-23.2	%
Income From Continuing Operations		1,246			1,245		0.1	%		3,131			4,291		-27.0	%
Income From Discontinued Operations, net of tax		-			849		-			-			908		-
Net Income	$	1,246		$	2,094		-40.5	%	$	3,131		$	5,199		-39.8	%

As required by GAAP rules for joint ventures, SBC reflects Cingular’s results in the Equity in Net Income of Affiliates line of its Consolidated Statements of Income rather than in revenues and expenses. To facilitate peer comparisons, and in recognition of SBC’s majority economic ownership of the nation’s largest wireless provider and Cingular’s increased significance to SBC’s overall operations, SBC provides a supplemental consolidated income statement that includes full consolidation of Cingular’s operating results. This supplemental information also includes reconciliations to SBC's Consolidated Statements of Income on the following page.

Certain amounts in prior-period supplemental financial information have been reclassified to conform to the current period’s presentation.

Non-GAAP Financial Data Reconciliation

SBC Communications Inc.

Supplemental Consolidated Income Statements

For the Three Months Ended 9/30/2005

Dollars in millions

Unaudited Reported Non-GAAP

								Consolidatin	g		Supplemental
		SBC			Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	10,320		$	8,746		$	(220	)	$	18,846
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,352			3,667			(220	)		7,799
Selling, general and administrative		2,203			2,881			-			5,084
Depreciation and amortization		1,803			1,541			-			3,344
Total Operating Expenses		8,358			8,089			(220	)		16,227
Operating Income		1,962			657			-			2,619
Interest Expense		349			304			(71	)		582
Interest Income		82			8			(71	)		19
Minority Interest		-			(38	)		(130	)		(168	)
Equity in Net Income (Loss) of Affiliates		219			1			(133	)		87
Other Income (Expense) - Net		(70	)		2			-			(68	)
Income Before Income Taxes		1,844			326			(263	)		1,907
Income Taxes		598			104			(41	)		661
Net Income	$	1,246		$	222		$	(222	)	$	1,246

For the Three Months Ended 9/30/2004

Dollars in millions

Unaudited Reported Non-GAAP

							Consolidatin	g		Supplemental
		SBC		Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	10,292	$	4,292		$	(151	)	$	14,433
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,319		1,692			(151	)		5,860
Selling, general and administrative		2,386		1,567			-			3,953
Depreciation and amortization		1,889		573			(1	)		2,461
Total Operating Expenses		8,594		3,832			(152	)		12,274
Operating Income		1,698		460			1			2,159
Interest Expense		238		200			(90	)		348
Interest Income		140		1			(90	)		51
Minority Interest		-		(20	)		(58	)		(78	)
Equity in Net Income (Loss) of Affiliates		210		(98	)		(85	)		27
Other Income (Expense) - Net		45		(1	)		-			44
Income Before Income Taxes		1,855		142			(142	)		1,855
Income Taxes		610		-			-			610
Income From Continuing Operations		1,245		142			(142	)		1,245
Income From Discontinued Operations, net of tax		849		-			-			849
Net Income	$	2,094	$	142		$	(142	)	$	2,094

Non-GAAP Financial Data Reconciliation

SBC Communications Inc.

Supplemental Consolidated Income Statements

For the Nine Months Ended 9/30/2005

Dollars in millions

Unaudited Reported Non-GAAP

								Consolidatin	g		Supplemental
		SBC			Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	30,896		$	25,584		$	(607	)	$	55,873
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		13,176			10,629			(607	)		23,198
Selling, general and administrative		7,247			8,835			-			16,082
Depreciation and amortization		5,437			4,845			-			10,282
Total Operating Expenses		25,860			24,309			(607	)		49,562
Operating Income		5,036			1,275			-			6,311
Interest Expense		1,051			968			(251	)		1,768
Interest Income		291			44			(251	)		84
Minority Interest		(1	)		(95	)		(112	)		(208	)
Equity in Net Income (Loss) of Affiliates		342			4			(77	)		269
Other Income (Expense) - Net		12			19			-			31
Income Before Income Taxes		4,629			279			(189	)		4,719
Income Taxes		1,498			150			(60	)		1,588
Income Before Cumulative
Effect of Accounting Changes		3,131			129			(129	)		3,131
Net Income	$	3,131		$	129		$	(129	)	$	3,131

For the Nine Months Ended 9/30/2004

Dollars in millions

Unaudited Reported Non-GAAP

							Consolidatin	g		Supplemental
		SBC		Cingular			Adjustment	s		Consolidated
Total Operating Revenues	$	30,500	$	12,446		$	(436	)	$	42,510
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		12,902		4,672			(452	)		17,122
Selling, general and administrative		7,244		4,402			(1	)		11,645
Depreciation and amortization		5,700		1,691			(2	)		7,389
Total Operating Expenses		25,846		10,765			(455	)		36,156
Operating Income		4,654		1,681			19			6,354
Interest Expense		705		597			(266	)		1,036
Interest Income		376		3			(266	)		113
Minority Interest		-		(88	)		(291	)		(379	)
Equity in Net Income (Loss) of Affiliates		1,171		(301	)		(426	)		444
Other Income (Expense) - Net		862		2			-			864
Income Before Income Taxes		6,358		700			(698	)		6,360
Income Taxes		2,067		4			(2	)		2,069
Income From Continuing Operations		4,291		696			(696	)		4,291
Income From Discontinued Operations, net of tax		908		-			-			908
Income Before Extraordinary item and Cumulative
Effect of Accounting Changes		5,199		696			(696	)		5,199
Net Income	$	5,199	$	696		$	(696	)	$	5,199