http://www.morningstar.com/earnings/44501004-att-inc-t-q3-2012.aspx

AT&T Inc T
Q3 2012 Earnings Call Transcript

Transcript Call Date 10/24/2012

Operator: Thank you for standing by and welcome to AT&T's Third Quarter 2012 Earnings Release. For the conference, all the participants are in a listen-only mode. There will be an opportunity for your questions. Instructions will be given at that time. As a reminder, today's call is being recorded.

With that being said, I'll turn the conference now to Susan Johnson. Please, go ahead.

Susan Johnson - SVP, IR: Thank you, John. Good morning everyone, and welcome to our third quarter conference call. It's great to have you with us this morning. I'm Susan Johnson, Head of Investor Relations for AT&T. Joining me on the call today is John Stephens, AT&T's Chief Financial Officer and Ralph de la Vega, AT&T's President and CEO for Mobility. John will cover our consolidated wireline results and Ralph will give us an update on our wireless business. Then we'll follow with Q&A.

Let me remind you, our earnings materials are available on the Investor Relations page of the AT&T website at www.att.com/investor.relations.

I always need to cover our Safe Harbor statement, which is on Slide 2. This presentations and comments may contain forward-looking statements. They're subject to risks. Results may differ materially. Details are in our SEC filing and on AT&T's website.

Before I turn the call over to John, let me quickly cover our consolidated financial summary, which is on Slide 4. Reported EPS for the quarter was $0.63, $0.02 higher than last year's third quarter and when you exclude our divested Ad Solutions unit, we are $0.03 or 5% for the quarter and 8% year-to-date. Revenue growth continues to be solid. When you exclude the divested Advertising Solutions business, consolidated revenues were up 2.6% year-over-year. Thanks to strong revenue growth in wireless, continued gains in U-verse services and growth in strategic business services.

Consolidated margins were down slightly year-over-year due to higher smartphone sales, and cash flow was very impressive. In fact, it was at record levels. Cash flow from operating activities for the quarter totaled $11.5 billion and free cash flow was $6.5 billion.

We aggressively bought back shares as part of our repurchase program. Through the end of last week, we have bought back more than 271 million shares for $9.4 billion.

With that overview, I'll now turn the call over to AT&T's Chief Financial Officer, John Stephens. John?

John Stephens - SVP and CFO: Thank you, Susan, and good morning everyone. Thank you for being with us today. Before we get to detailed results, let's start with a quick overview, highlights are on Slide 5.

During the quarter, we continued doing an excellent job of growing the business, transforming our revenue streams and improving our cost structure. We had solid revenue growth, consolidated, wireless and consumer wireline. We grew earnings and we had our best free cash flow ever, both in the quarter and year-to-date. We also took a significant step to improving our funding status for our pension plans.

Last week, we filed an application with the Department of Labor that seeks authorization to voluntarily contribute a $9.5 billion preferred equity interest in AT&T Mobility into the pension plan trust. We see this as a win-win situation for investors, our employees and our retirees. This will increase funding well above the required level by law and further assure the long-term health of our pension fund.

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