AT&T (T) 8-K IP-Based Services, Strong Margins and Cash Flow Highlight

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended
	3/31/2010			3/31/2009			% Chg
Operating Revenues
Wireless service	$	12,850		$	11,646			10.3	%
Voice		7,479			8,503			-12.0	%
Data		6,631			6,281			5.6	%
Directory		1,041			1,249			-16.7	%
Other		2,648			2,892			-8.4	%
Total Operating Revenues		30,649			30,571			0.3	%
Operating Expenses
Cost of services and sales (exclusive of
depreciation and amortization shown separately below)		12,329			12,195			1.1	%
Selling, general and administrative		7,484			7,753			-3.5	%
Depreciation and amortization		4,826			4,886			-1.2	%
Total Operating Expenses		24,639			24,834			-0.8	%
Operating Income		6,010			5,737			4.8	%
Interest Expense		767			849			-9.7	%
Equity in Net Income of Affiliates		217			137			58.4	%
Other Income (Expense) - Net		(22	)		(15	)		-46.7	%
Income Before Income Taxes		5,438			5,010			8.5	%
Income Taxes		2,876			1,809			59.0	%
Net Income		2,562			3,201			-20.0	%
Less: Net Income Attributable to Noncontrolling Interest		(87	)		(75	)		-16.0	%
Net Income Attributable to AT&T	$	2,475		$	3,126			-20.8	%
Basic Earnings Per Share Attributable to AT&T	$	0.42		$	0.53			-20.8	%
Weighted Average Common
Shares Outstanding (000,000)		5,905			5,896			0.2	%
Diluted Earnings Per Share Attributable to AT&T	$	0.42		$	0.53			-20.8	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		5,935			5,922			0.2	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended
Wireless	3/31/2010			3/31/2009			% Chg
Segment Operating Revenues
Service	$	12,850		$	11,646			10.3	%
Equipment		1,047			1,192			-12.2	%
Total Segment Operating Revenues		13,897			12,838			8.2	%
Segment Operating Expenses
Operations and support		8,183			7,886			3.8	%
Depreciation and amortization		1,558			1,499			3.9	%
Total Segment Operating Expenses		9,741			9,385			3.8	%
Segment Operating Income		4,156			3,453			20.4	%
Equity in Net Income of Affiliates		13			-			-
Segment Income	$	4,169		$	3,453			20.7	%
Segment Operating Income Margin		29.9	%		26.9	%
Wireline
Segment Operating Revenues
Voice	$	7,479		$	8,503			-12.0	%
Data		6,631			6,281			5.6	%
Other		1,311			1,377			-4.8	%
Total Segment Operating Revenues		15,421			16,161			-4.6	%
Segment Operating Expenses
Operations and support		10,612			10,928			-2.9	%
Depreciation and amortization		3,099			3,176			-2.4	%
Total Segment Operating Expenses		13,711			14,104			-2.8	%
Segment Operating Income		1,710			2,057			-16.9	%
Equity in Net Income of Affiliates		5			3			66.7	%
Segment Income	$	1,715		$	2,060			-16.7	%
Segment Operating Income Margin		11.1	%		12.7	%
Advertising Solutions
Segment Operating Revenues	$	1,041		$	1,249			-16.7	%
Segment Operating Expenses
Operations and support		675			721			-6.4	%
Depreciation and amortization		138			176			-21.6	%
Total Segment Operating Expenses		813			897			-9.4	%
Segment Income	$	228		$	352			-35.2	%
Segment Income Margin		21.9	%		28.2	%
Other
Segment Operating Revenues	$	290		$	323			-10.2	%
Segment Operating Expenses		374			448			-16.5	%
Segment Operating Income (Loss)		(84	)		(125	)		32.8	%
Equity in Net Income of Affiliates		199			134			48.5	%
Segment Income	$	115		$	9			-
Segment Income Margin		39.7	%		2.8	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	3/31/10			12/31/09
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	2,617		$	3,802
Accounts receivable - net of allowances for
doubtful accounts of $1,125 and $1,205		14,167			14,978
Prepaid expenses		1,820			1,572
Deferred income taxes		1,293			1,274
Other current assets		2,465			2,708
Total current assets		22,362			24,334
Property, Plant and Equipment - Net		99,360			100,093
Goodwill		73,052			73,259
Licenses		49,028			48,759
Customer Lists and Relationships - Net		6,624			7,420
Other Intangible Assets - Net		5,680			5,644
Investments in Equity Affiliates		3,278			2,921
Other Assets		6,317			6,322
Total Assets	$	265,701		$	268,752
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	9,437		$	7,361
Accounts payable and accrued liabilities		18,087			20,999
Advanced billing and customer deposits		4,061			4,170
Accrued taxes		2,639			1,696
Dividends payable		2,482			2,479
Total current liabilities		36,706			36,705
Long-Term Debt		60,024			64,720
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		25,520			23,803
Postemployment benefit obligation		27,709			27,849
Other noncurrent liabilities		13,276			13,350
Total deferred credits and other noncurrent liabilities		66,505			65,002
Stockholders' Equity
Common stock ($1 par value)		6,495			6,495
Additional paid-in-capital		91,557			91,707
Retained earnings		39,373			39,366
Treasury stock (at cost)		(21,137	)		(21,260	)
Accumulated other comprehensive loss		(14,265	)		(14,408	)
Noncontrolling interest		443			425
Total stockholders' equity		102,466			102,325
Total Liabilities and Stockholders' Equity	$	265,701		$	268,752

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
Unaudited	Three months ended
	March 31,
	2010			2009
Operating Activities
Net income	$	2,562		$	3,201
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		4,826			4,886
Undistributed earnings from investments in equity affiliates		(201	)		(124	)
Bad debt expense		350			509
Deferred income tax expense		1,612			126
Net loss from impairment and sale of investments		50			82
Changes in operating assets and liabilities:
Accounts receivable		461			573
Other current assets		88			(51	)
Accounts payable and accrued liabilities		(2,084	)		(1,931	)
Net income attributable to noncontrolling interest		(87	)		(75	)
Other - net		(324	)		719
Total adjustments		4,691			4,714
Net Cash Provided by Operating Activities		7,253			7,915
Investing Activities
Construction and capital expenditures
Capital expenditures		(3,156	)		(3,173	)
Interest during construction		(184	)		(185	)
Acquisitions, net of cash acquired		(178	)		-
Dispositions		1			181
Sales of securities net of investments		(20	)		15
Other		8			5
Net Cash Used in Investing Activities		(3,529	)		(3,157	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		323			(3,909	)
Issuance of long-term debt		-			5,450
Repayment of long-term debt		(2,512	)		(1,261	)
Issuance of treasury stock		3			1
Dividends paid		(2,479	)		(2,416	)
Other		(244	)		(603	)
Net Cash Used in Financing Activities		(4,909	)		(2,738	)
Net increase (decrease) in cash and cash equivalents		(1,185	)		2,020
Cash and cash equivalents beginning of year		3,802			1,792
Cash and Cash Equivalents End of Period	$	2,617		$	3,812

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts
Unaudited	Three Months Ended
	3/31/2010			3/31/2009			% Chg
Wireless
Wireless Customers (000)		86,987			78,232			11.2	%
Net Customer Additions (000)		1,857			1,223			51.8	%
M&A Activity, Partitioned Customers and Other Adjs. (000)		10			-
Total Churn7		1.30	%		1.56	%	-26 BP
Postpaid Customers (000)7		65,108			60,535			7.6	%
Net Postpaid Customer Additions (000)7		512			897			-42.9	%
Postpaid Churn7		1.07	%		1.15	%	-8 BP
Licensed POPs (000,000)		307			306			0.3	%
In-Region Wireline 1
Total Consumer Revenue Connections (000)
Retail Consumer Voice Connections 2		26,633			29,969			-11.1	%
Consumer Wired Broadband Connections 3		13,989			13,344			4.8	%
Video Connections: 4
Satellite Connections		2,127			2,205			-3.5	%
U-verse Video Connections		2,295			1,329			72.7	%
Total Consumer Revenue Connections (000)		45,044			46,847			-3.8	%
Net Consumer Revenue Connection Changes (000)		(243	)		(196	)		-24.0	%
Broadband and Video
Total Broadband Connections (000) 5		17,532			16,736			4.8	%
Net Broadband Connection Changes (000) 5		278			471			-41.0	%
Total Video Connections (000) 4		4,423			3,534			25.2	%
Net Video Connection Changes (000) 4		184			299			-38.5	%
AT&T Inc.
Construction and capital expenditures
Capital expenditures	$	3,156		$	3,173			-0.5	%
Interest during construction	$	184		$	185			-0.5	%
Dividends Declared per Share	$	0.4200		$	0.4100			2.4	%
End of Period Common Shares Outstanding (000,000)		5,909			5,900			0.2	%
Debt Ratio 6		40.4	%		43.2	%	-280 BP
Total Employees		276,280			294,600			-6.2	%

1	In-region wireline represents access lines served by AT&T's incumbent local exchange companies.
2	Includes consumer U-verse Voice over IP connections.
3	Consumer Wired Broadband Connections include DSL lines, U-verse High Speed Internet access and satellite broadband.
4	Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.
5	Total broadband connections include DSL lines, U-verse High Speed Internet access, satellite broadband and 3G LaptopConnect cards.
6	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
7	Prior year amounts restated to conform to current period reporting methodology.
	Note: For the end of 1Q10, total switched access lines were 48,083, retail business switched access lines totaled 19,854, and wholesale and coin switched access lines totaled 2,741.

Financial Data
AT&T Inc.
Non-GAAP Financial Reconciliations
Free Cash Flow
AT&T Inc.
Dollars in Millions
Unaudited
March 31, 2010	Three Months Ended
Net cash provided by operating activities	$	7,253
Less: Construction and capital expenditures		(3,340	)
Free Cash Flow	$	3,913

Free cash flow is defined as cash from operations minus capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Non-GAAP Wireless Reconciliation
Wireless Segment OIBDA
AT&T Inc.
Dollars in millions
Unaudited
	Three Months Ended
	3/31/2009			6/30/2009			9/30/2009			12/31/2009			3/31/2010
Service Revenues	$	11,646		$	11,960		$	12,372		$	12,585		$	12,850
Equipment Revenues		1,192			1,262			1,255			1,232			1,047
Total Operating Revenues		12,838			13,222			13,627			13,817			13,897
Operating Expenses
Operations and support		7,886			8,428			8,645			8,701			8,183
Depreciation and amortization		1,499			1,504	��		1,490			1,550			1,558
Total Operating Expenses		9,385			9,932			10,135			10,251			9,741
Operating Income		3,453			3,290			3,492			3,566			4,156
Plus: Depreciation and amortization		1,499			1,504			1,490			1,550			1,558
OIBDA		4,952			4,794			4,982			5,116			5,714
OIBDA as a % of Service Revenue		42.5	%		40.1	%		40.3	%		40.7	%		44.5	%

OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from segment operating income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.