AT&T Inc.
NYSE : T

AT&T Inc.

January 26, 2006 07:00 ET

The New AT&T Delivers Strong Fourth Quarter, With Growth in Wireless and Broadband, Expansion in Business Services

SAN ANTONIO--(CCNMatthews - Jan 26, 2006) -

AT&T Inc. (NYSE: T):

-- Earnings per diluted share of $0.46 on a reported basis, $0.48 on an adjusted basis

-- 1.8 million net subscriber gain at Cingular Wireless, with reduced churn and substantial margin expansion versus the year-earlier fourth quarter

-- Seventh consecutive quarter of wireline revenue growth, with consumer revenues up 4.6 percent and business revenues up 1.9 percent

-- DSL/Internet revenues up 21 percent; DSL lines in service exceed 6.9 million, up 425,000 in the quarter and 1.8 million for the year

-- $4.59 billion in cash from operations in the fourth quarter; share repurchases of $1.1 billion; 21st consecutive annual dividend increase approved in December

Note: AT&T's fourth-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. EST on Jan. 26, 2006, at www.sbc.com/att.investor.relations.

AT&T Inc. (NYSE: T), the United States' largest telecommunications company, today reported strong fourth-quarter results reflecting solid progress in wireless, broadband and business services.

On Nov. 18, 2005, SBC Communications Inc. completed its acquisition of AT&T Corp. and adopted AT&T Inc. as its name. In its first quarter of combined operations, the new AT&T delivered earnings of $1.66 billion, or $0.46 per diluted share, on a reported basis and $1.71 billion, or $0.48 per diluted share, before merger-related, severance, and Cingular hurricane costs, and a gain from tax settlements.

"The new AT&T has gotten off to a very strong start," said Edward E. Whitacre Jr., AT&T chairman and chief executive officer. "We continue to execute well across our operations, and we have moved quickly on merger integration. The assets we acquired are in excellent shape, we did a thorough job of merger planning, we have retained key talent, and customer response to the new AT&T has been very positive.

"In addition to large synergy opportunities, the new AT&T has the industry's premier set of assets," Whitacre said. "We have outstanding wireless capabilities through our 60 percent ownership in Cingular. Our networks and product sets for business customers are unmatched. And we are the industry leader in broadband, where we have built the largest DSL base among U.S. telecom companies.

"These assets are a strong growth platform for a broad range of next-generation services," Whitacre said. "I am confident in our ability to build on these strengths and generate value for our stockholders in the years ahead."

Fourth-Quarter Consolidated Financial Results

In accordance with purchase accounting rules, AT&T's reported results for the quarter ended Dec. 31, 2005, are composed of SBC stand-alone results prior to the merger close, plus combined results for the remainder of the quarter.

In addition, results for the quarter include: (1) AT&T's portion of Cingular Wireless' $707 million of merger integration and noncash intangible amortization costs, which amount to $0.08 per diluted share; (2) AT&T's portion of Cingular hurricane-related costs of $20 million; (3) a tax gain of $902 million, or $0.25 per diluted share, resulting from tax settlements; (4) non-merger force-reduction costs of $106 million, or $0.02 per diluted share; and (5) charges totaling $866 million, or $0.16 per diluted share, for AT&T merger-related costs, including asset impairments, severance, non-cash customer amortization and merger integration.

-- On a reported basis, AT&T's fourth-quarter earnings totaled $1.66 billion, or $0.46 per diluted share.

-- Excluding the items noted above, earnings would have totaled $1.71 billion, or $0.48 per diluted share.

-- These results compare with fourth-quarter 2004 earnings from continuing operations of $688 million, or $0.21 per diluted share, on a reported basis and $1.13 billion, or $0.34 per diluted share, before tax settlement impacts, pension and force-reduction charges, Cingular merger-related costs and Cingular lease accounting adjustments.

AT&T's consolidated fourth-quarter 2005 revenues totaled $12.97 billion. On a reported basis, operating expenses totaled $11.83 billion, and operating income was $1.13 billion, resulting in an operating income margin of 8.7 percent. Excluding the items noted above, operating expenses would have totaled $10.86 billion, operating income would have been $2.10 billion, and AT&T's operating income margin would have been 16.2 percent.

Fourth-quarter cash from operations totaled $4.59 billion, and during the quarter, the company used $1.10 billion to repurchase more than 45 million of its common shares. On Dec. 9, 2005, AT&T's board of directors approved a 3.1 percent increase in the quarterly dividend. This was the company's 21st consecutive annual dividend increase.

Wireline Segment Results

Wireline segment revenues, which are made up of former SBC wireline results, totaled $9.43 billion in the fourth quarter, up 1.3 percent from the fourth quarter of 2004. Wireline consumer revenues grew 4.6 percent, and business revenues increased 1.9 percent. This marked the company's seventh consecutive quarter of growth in consumer, business and total wireline revenues. Business and consumer revenue growth was partially offset by expected declines in wholesale revenues, reflecting a reduction in UNE-P access lines.

Fourth-quarter 2005 wireline operating expenses totaled $8.94 billion on a reported basis and $8.16 billion before severance and merger-related costs. This compares with operating expenses in the year-earlier fourth quarter of $8.66 billion on a reported basis and $8.42 billion before force-reduction and pension charges.

AT&T's fourth-quarter 2005 wireline operating income margin was 5.1 percent on a reported basis and 13.5 percent, excluding severance and merger-related costs. This marks a substantial improvement versus the fourth quarter of 2004, when the company's wireline operating income margin was 6.9 percent on a reported basis and 9.5 percent before force-reduction and pension charges.

In the fourth quarter, AT&T's wireline segment:

-- Achieved 21.0 percent growth in DSL/Internet revenues versus the fourth quarter of 2004. AT&T increased its DSL line base by 425,000, the same as in the year-earlier fourth quarter, and ended 2005 with 6.9 million DSL lines in service, the highest total among U.S. telecommunications providers. For the full year 2005, AT&T increased its DSL lines by 1.8 million, its best-ever annual gain.

-- Grew data revenues 7.8 percent versus results in the year-earlier quarter to $3.10 billion, driven by DSL/Internet growth, along with solid results in transport services.

-- Posted its sixth straight quarter with a net increase in consumer revenue connections - retail access lines, DSL lines and video subscribers - which were up 185,000 in the quarter and 1 million for all of 2005.

-- Grew long distance revenues 13.4 percent to $984 million, with 177,000 long distance lines added during the fourth quarter to reach 23.5 million in service.

Wireline retail business lines declined by 54,000 in the fourth quarter of 2005, compared with a decline of 74,000 in the year-earlier quarter. Consumer retail primary lines declined by 129,000 versus 73,000 in the fourth quarter of 2004. Additional lines declined by 99,000 versus a decline of 119,000 in the year-earlier quarter. Total switched wholesale lines declined by 490,000 versus a decline of 302,000 in the fourth quarter of 2004. Wireline operations ended the year with 49.4 million switched access lines in service.

Cingular Wireless Results

AT&T is 60 percent owner of Cingular Wireless, the United States' largest wireless provider. As required by Generally Accepted Accounting Principles for joint ventures, AT&T includes Cingular Wireless' results in the Equity in Net Income of Affiliates line of its Consolidated Statements of Income rather than in consolidated revenues and expenses. Cingular's detailed financial results are shown in AT&T's Statements of Segment Income.

In the fourth quarter, Cingular achieved a net subscriber gain of 1.8 million, its best-ever quarterly gain. Gross subscriber additions totaled 5.1 million, and average monthly subscriber churn was 2.1 percent, Cingular's lowest ever.

Cingular's fourth-quarter 2005 revenues totaled $8.85 billion, reported operating expenses totaled $8.30 billion, and reported operating income totaled $549 million. Excluding $326 million of direct merger integration costs, $381 million of noncash expenses for the amortization of intangibles that were acquired as part of Cingular's merger with AT&T Wireless, and $20 million of hurricane-related costs, fourth-quarter operating income would have been $1.28 billion. Cingular's fourth-quarter 2004 operating income was $(153) million on a reported basis and $490 million before merger integration costs and noncash expenses for the amortization of intangibles.

Cingular's average data revenue per user was up 63 percent from the year-earlier quarter. In the fourth quarter, Cingular had nearly 24 million active data customers and delivered 72 million multimedia messages and 6.1 billion text messages.

Also in the fourth quarter of 2005, Cingular became the first carrier in the world to operate a commercial UMTS/HSDPA network, which provides industry-leading data throughputs with speeds of 400 to 700 Kbps. Cingular deployed UMTS/HSDPA in 16 markets during the quarter and plans to launch in most of the United States' top 100 markets by the end of 2006.

AT&T Corp. Segment Results

In accordance with purchase accounting rules, AT&T Corp. fourth-quarter reported segment results - which are composed of operations that had been part of AT&T Corp. prior to its merger with SBC - do not reflect results before the acquisition. On this basis, AT&T Corp. revenues for the fourth quarter totaled $2.89 billion, operating expenses were $2.77 billion, and operating income was $118 million. Excluding $184 million of non-cash expense for customer amortization, fourth-quarter AT&T Corp. segment operating income would have been $302 million.

To help investors understand business trends and to provide improved comparability versus previous quarters, for this transitional quarter, AT&T Inc. also is furnishing full-period revenues for the AT&T Corp. segment. These revenue totals are consistent with how they were reported in previous quarters. (For detailed information, please see AT&T's Investor Briefing and Financial and Operational Results on its Web site at www.sbc.com/att.investor.relations.

For the full quarter, AT&T Corp. pro forma business revenues declined 8.3 percent, reflecting continued pricing pressures in traditional voice and data products, offset in part by growth in IP-based products and E-services. Fourth-quarter 2004 business revenues included a gain of $97 million from a reciprocal compensation settlement. Excluding this gain, AT&T Corp. fourth-quarter business revenues would have declined 6.7 percent. Also, AT&T sold its pay phone business in the second quarter of 2005; excluding revenues from that unit, fourth-quarter business revenues would have declined 5.9 percent.

For the full quarter, pro forma consumer revenues declined 24.9 percent, in line with results in recent quarters, reflecting industry trends and the company's decision to shift its emphasis to other segments of the business. Total AT&T Corp. pro forma revenues for the full quarter declined 12.4 percent versus the fourth quarter of 2004.

AT&T Analyst Conference Scheduled for Jan. 31, 2006

AT&T will provide its outlook for 2006 and subsequent years, along with details on the business strategies and plans that support that outlook, during an analyst conference/webcast on Tuesday Jan. 31, 2006. Presentations will include updates on expected operating margins, capital expenditures, revenue and expenses, synergies from the AT&T merger and a financial update on Project Lightspeed. AT&T will not discuss its outlook prior to the conference. The conference will be webcast on the Investor Relations page of the AT&T Web site at www.sbc.com/att.investor.relations starting at 12:30 p.m. Eastern time.

About the New AT&T

AT&T Inc. is one of the world's largest telecommunications holding companies and is the largest in the United States. Operating globally under the AT&T brand, AT&T companies are recognized as the leading worldwide providers of IP-based communications services to business and as leading U.S. providers of high-speed DSL Internet, local and long distance voice, and directory publishing and advertising services. AT&T Inc. holds a 60 percent ownership interest in Cingular Wireless, which is the No. 1 U.S. wireless services provider with more than 54 million wireless customers. Additional information about AT&T Inc. and AT&T products and services is available at www.TheNewATT.com.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise.

This news release 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.sbc.com/att.investor.relations.



----------------------------------------------------------------------
Financial Data

AT&T Inc.
----------------------------------------------------------------------
Consolidated Statements of Income
Dollars in millions except per share amounts
----------------------------------------------------------------------
Unaudited Three Months Ended Twelve Months Ended
------------------------ ------------------------
12/31/05 12/31/04 % Chg 12/31/05 12/31/04 % Chg
--------------------------------------------- ------------------------
Operating Revenues
Voice $5,048 $5,092 -0.9% $20,037 $20,796 -3.6%
Data 4,134 2,877 43.7% 12,964 10,984 18.0%
Long-distance voice 2,192 868 - 4,964 3,297 50.6%
Directory advertising 930 963 -3.4% 3,786 3,832 -1.2%
Other 662 487 35.9% 2,111 1,878 12.4%
--------------------------------------------- ------------------------
Total Operating
Revenues 12,966 10,287 26.0% 43,862 40,787 7.5%
--------------------------------------------- ------------------------

Operating Expenses
Cost of sales
(exclusive of
depreciation and
amortization shown
separately below) 6,014 4,613 30.4% 19,190 17,515 9.6%
--------------------------------------------- ------------------------
Selling, general
and administrative 3,614 2,563 41.0% 10,861 9,807 10.7%
--------------------------------------------- ------------------------
Depreciation and
amortization 2,206 1,864 18.3% 7,643 7,564 1.0%
--------------------------------------------- ------------------------
Total Operating
Expenses 11,834 9,040 30.9% 37,694 34,886 8.0%
--------------------------------------------- ------------------------
Operating Income 1,132 1,247 -9.2% 6,168 5,901 4.5%
--------------------------------------------- ------------------------
Interest Expense 405 318 27.4% 1,456 1,023 42.3%
--------------------------------------------- ------------------------
Interest Income 92 116 -20.7% 383 492 -22.2%
--------------------------------------------- ------------------------
Equity in Net Income
(Loss) of Affiliates 267 (298) - 609 873 -30.2%
--------------------------------------------- ------------------------
Other Income
(Expense) - Net 3 60 -95.0% 14 922 -98.5%
--------------------------------------------- ------------------------
Income Before Income
Taxes 1,089 807 34.9% 5,718 7,165 -20.2%
--------------------------------------------- ------------------------
Income Tax (Benefit) (566) 119 - 932 2,186 -57.4%
--------------------------------------------- ------------------------
Income From
Continuing
Operations 1,655 688 - 4,786 4,979 -3.9%
--------------------------------------------- ------------------------
Income From
Discontinued
Operations,
net of tax - - - - 908 -
--------------------------------------------- ------------------------
Net Income $1,655 $688 - $4,786 $5,887 -18.7%
============================================= ========================

Basic Earnings Per Share:
Income from
Continuing
Operations $0.46 $0.21 - $1.42 $1.50 -5.3%
Net Income $0.46 $0.21 - $1.42 $1.78 -20.2%
Weighted Average
Common Shares
Outstanding
(000,000) 3,569 3,307 7.9% 3,368 3,310 1.8%

Diluted Earnings Per Share:
Income from
Continuing
Operations $0.46 $0.21 - $1.42 $1.50 -5.3%
Net Income $0.46 $0.21 - $1.42 $1.77 -19.8%
Weighted Average
Common Shares
Outstanding with
Dilution (000,000) 3,580 3,317 7.9% 3,379 3,322 1.7%







----------------------------------------------------------------------
Financial Data

AT&T Inc.
----------------------------------------------------------------------
Statements of Segment Income
Dollars in millions
----------------------------------------------------------------------
Unaudited Three Months Ended Twelve Months Ended
------------------------ ------------------------

Wireline 12/31/05 12/31/04 % Chg 12/31/05 12/31/04 % Chg
--------------------------------------------- ------------------------
Segment Operating
Revenues
Voice $4,915 $5,092 -3.5% $19,904 $20,796 -4.3%
Data 3,100 2,877 7.8% 11,930 10,984 8.6%
Long-distance voice 984 868 13.4% 3,756 3,297 13.9%
Other 428 469 -8.7% 1,855 1,810 2.5%
--------------------------------------------- ------------------------
Total Segment
Operating
Revenues 9,427 9,306 1.3% 37,445 36,887 1.5%
--------------------------------------------- ------------------------

Segment Operating
Expenses
Cost of sales 4,396 4,401 -0.1% 16,814 16,603 1.3%
--------------------------------------------- ------------------------
Selling, general
and administrative
Selling 1,764 1,807 -2.4% 6,538 6,747 -3.1%
General and
administrative 1,017 620 64.0% 2,967 2,459 20.7%
--------------------------------------------- ------------------------
Selling, general
and administrative 2,781 2,427 14.6% 9,505 9,206 3.2%
--------------------------------------------- ------------------------
Depreciation and
amortization 1,766 1,836 -3.8% 7,121 7,454 -4.5%
--------------------------------------------- ------------------------
Total Segment
Operating
Expenses 8,943 8,664 3.2% 33,440 33,263 0.5%
--------------------------------------------- ------------------------
Segment Income $484 $642 -24.6% $4,005 $3,624 10.5%
============================================= ========================


AT&T Corp.(1)
--------------------------------------------- ------------------------
Segment Operating
Revenues
Voice $361 $- - $361 $- -
Data 1,129 - - 1,129 - -
Long-distance voice 1,208 - - 1,208 - -
Other 189 - - 189 - -
--------------------------------------------- ------------------------
Total Segment
Operating
Revenues 2,887 - - 2,887 - -
--------------------------------------------- ------------------------

Segment Operating
Expenses
Cost of sales 1,686 - - 1,686 - -
--------------------------------------------- ------------------------
Selling, general
and administrative
Selling 587 - - 587 - -
General and
administrative 82 - - 82 - -
--------------------------------------------- ------------------------
Selling, general
and administrative 669 - - 669 - -
--------------------------------------------- ------------------------
Depreciation and
amortization 414 - - 414 - -
--------------------------------------------- ------------------------
Total Segment
Operating
Expenses 2,769 - - 2,769 - -
--------------------------------------------- ------------------------
Segment Operating
Income 118 - - 118 - -
--------------------------------------------- ------------------------
Equity in Net Income
of Affiliates 2 - - 2 - -
--------------------------------------------- ------------------------
Segment Income $120 $- - $120 $- -
============================================= ========================


(1) Reflects 100% of results from AT&T Corp. beginning on November 18,
2005

Cingular(2)
--------------------------------------------- ------------------------
Segment Operating
Revenues
Service revenues $7,779 $6,313 23.2% $30,638 $17,602 74.1%
Equipment sales 1,070 806 32.8% 3,795 1,963 93.3%
--------------------------------------------- ------------------------
Total Segment
Operating
Revenues 8,849 7,119 24.3% 34,433 19,565 76.0%
--------------------------------------------- ------------------------

Segment Operating
Expenses
Cost of services
and equipment
sales 3,758 2,939 27.9% 14,387 7,611 89.0%
Selling, general
and administrative 2,812 2,947 -4.6% 11,647 7,349 58.5%
Depreciation and
amortization 1,730 1,386 24.8% 6,575 3,077 -
--------------------------------------------- ------------------------
Total Segment
Operating
Expenses 8,300 7,272 14.1% 32,609 18,037 80.8%
--------------------------------------------- ------------------------
Segment Operating
Income (Loss) 549 (153) - 1,824 1,528 19.4%
--------------------------------------------- ------------------------
Other Income
(Expense) - Net (297) (404) 26.5% (1,293) (1,385) 6.6%
--------------------------------------------- ------------------------
Segment Income (Loss) $252 $(557) - $531 $143 -
============================================= ========================


(2) Results reflect 100% of Cingular Wireless' actual results

Directory
--------------------------------------------- ------------------------
Segment Operating
Revenues $928 $953 -2.6% $3,714 $3,759 -1.2%
--------------------------------------------- ------------------------

Segment Operating
Expenses
Cost of sales 277 258 7.4% 1,103 1,022 7.9%
--------------------------------------------- ------------------------
Selling, general
and administrative
Selling 46 82 -43.9% 238 235 1.3%
General and
administrative 91 93 -2.2% 374 387 -3.4%
--------------------------------------------- ------------------------
Selling, general
and administrative 137 175 -21.7% 612 622 -1.6%
--------------------------------------------- ------------------------
Depreciation and
amortization 1 2 -50.0% 5 9 -44.4%
--------------------------------------------- ------------------------
Total Segment
Operating
Expenses 415 435 -4.6% 1,720 1,653 4.1%
--------------------------------------------- ------------------------
Segment Operating
Income 513 518 -1.0% 1,994 2,106 -5.3%
--------------------------------------------- ------------------------
Equity in Net Income
(Loss) of Affiliates (4) - - (5) - -
--------------------------------------------- ------------------------
Segment Income $509 $518 -1.7% $1,989 $2,106 -5.6%
============================================= ========================


International
--------------------------------------------- ------------------------
Segment Operating
Revenues $2 $5 -60.0% $10 $22 -54.5%
--------------------------------------------- ------------------------
Segment Operating
Expenses 15 12 25.0% 28 31 -9.7%
--------------------------------------------- ------------------------
Segment Operating
Loss (13) (7)-85.7% (18) (9) -
--------------------------------------------- ------------------------
Equity in Net Income
of Affiliates 148 99 49.5% 395 812 -51.4%
--------------------------------------------- ------------------------
Segment Income $135 $92 46.7% $377 $803 -53.1%
============================================= ========================









----------------------------------------------------------------------
Financial Data

AT&T Inc.
----------------------------------------------------------------------
Consolidated Balance Sheets
Dollars in millions except per share amounts 12/31/05 12/31/04
----------------------------------------------------------------------
Unaudited


Assets
Current Assets
Cash and cash equivalents $1,224 $760
Accounts receivable - net of allowances for
uncollectibles of $1,176 and $1,001 9,351 6,901
Prepaid expenses 1,029 746
Deferred income taxes 2,011 566
Other current assets 1,039 989
----------------------------------------------------------------------
Total current assets 14,654 9,962
----------------------------------------------------------------------
Property, plant and equipment - at cost 149,238 136,177
Less: accumulated depreciation and amortization 90,511 86,131
----------------------------------------------------------------------
Property, Plant and Equipment - Net 58,727 50,046
----------------------------------------------------------------------
Goodwill 14,055 1,625
Investments in Equity Affiliates 2,031 1,798
Investments in and Advances to Cingular Wireless 31,404 33,687
Other Assets 24,761 13,147
----------------------------------------------------------------------
Total Assets $145,632 $110,265
======================================================================

Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year $4,455 $5,734
Accounts payable and accrued liabilities 17,088 11,459
Accrued taxes 2,586 1,787
Dividends payable 1,289 1,065
Liabilities of discontinued operations - 310
----------------------------------------------------------------------
Total current liabilities 25,418 20,355
----------------------------------------------------------------------
Long-Term Debt 26,115 21,231
----------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 15,713 15,621
Postemployment benefit obligation 18,133 9,076
Unamortized investment tax credits 209 188
Other noncurrent liabilities 5,354 3,290
----------------------------------------------------------------------
Total deferred credits and other noncurrent
liabilities 39,409 28,175
----------------------------------------------------------------------

Stockholders' Equity
Common shares issued ($1 par value) 4,065 3,433
Capital in excess of par value 27,499 13,350
Retained earnings 29,106 28,806
Treasury shares (at cost) (5,406) (4,535)
Additional minimum pension liability adjustment (218) (190)
Accumulated other comprehensive income (356) (360)
----------------------------------------------------------------------
Total stockholders' equity 54,690 40,504
----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $145,632 $110,265
======================================================================








----------------------------------------------------------------------
Financial Data

AT&T Inc.
----------------------------------------------------------------------
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
----------------------------------------------------------------------
Unaudited Twelve Months Ended
12/31/05 12/31/04 12/31/03
----------------------------------------------------------------------
Operating Activities
Net income $4,786 $5,887 $8,505
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 7,643 7,564 7,870
Undistributed earnings from
investments in equity
affiliates (451) (542) (965)
Provision for uncollectible
accounts 744 761 846
Amortization of investment tax
credits (21) (32) (24)
Deferred income tax (benefit)
expense (658) 646 3,446
Net gain on sales of
investments (135) (939) (1,775)
Extraordinary item, net of tax - - 7
Cumulative effect of
accounting changes, net of
tax - - (2,541)
Income from discontinued
operations, net of tax - (908) (112)
Retirement benefit funding - (2,232) (1,645)
Changes in operating assets
and liabilities:
Accounts receivable (94) 282 (2,121)
Other current assets 34 (102) (14)
Accounts payable and accrued
liabilities 84 414 2,293
Stock-based compensation tax
benefit (3) (5) (1)
Other - net 1,045 156 (363)
----------------------------------------------------------------------
Total adjustments 8,188 5,063 4,901
----------------------------------------------------------------------
Net Cash Provided by Operating
Activities 12,974 10,950 13,406
----------------------------------------------------------------------

Investing Activities
Construction and capital
expenditures (5,576) (5,099) (5,219)
Receipts from (investments in)
affiliates - net 2,436 (22,660) -
Purchases of held-to-maturity
securities - (135) (710)
Maturities of held-to-maturity
securities 99 499 248
Dispositions 526 6,672 3,020
Acquisitions, net of cash
acquired 1,504 (74) (8)
Proceeds from note repayment 37 50 -
Purchase of other investments - - (436)
----------------------------------------------------------------------
Net Cash Used in Investing
Activities (974) (20,747) (3,105)
----------------------------------------------------------------------

Financing Activities
Net change in short-term
borrowings with original
maturities of three
months or less (4,119) 3,398 (78)
Repayment of other short-term
borrowings - - (1,070)
Issuance of long-term debt 1,973 6,461 -
Repayment of long-term debt (2,682) (881) (3,148)
Purchase of treasury shares (1,843) (448) (490)
Issuance of treasury shares 432 216 102
Repurchase of preferred shares
of subsidiaries (728) - -
Dividends paid (4,256) (4,141) (4,539)
Stock-based compensation tax
benefit 3 5 1
Other (6) - -
----------------------------------------------------------------------
Net Cash (Used in) Provided by
Financing Activities (11,226) 4,610 (9,222)
----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents
from continuing operations 774 (5,187) 1,079
----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents
from discontinued operations (310) 1,141 156
----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 464 (4,046) 1,235
----------------------------------------------------------------------
Cash and cash equivalents
beginning of year 760 4,806 3,571
----------------------------------------------------------------------
Cash and Cash Equivalents End
of Year $1,224 $760 $4,806
======================================================================









Financial Data

AT&T Inc.
----------------------------------------------------------------------
Supplementary Operating Data
--------------------------------------------------- ------------------
Unaudited Three Months Twelve Months
Ended Ended
------------------ ------------------
12/31/05 12/31/04 12/31/05 12/31/04
--------------------------------------------------- ------------------

Wireline Segment
Switched Access Lines (000)
Retail Consumer -
Primary 22,793 23,206
Retail Consumer -
Additional 3,890 4,322
Retail Business 17,457 17,552
------------------
Retail 44,140 45,080
------------------

UNE-P 4,300 6,497
Resale 638 349
------------------
Wholesale (1) 4,938 6,846
------------------

Coin (2) 335 430
------------------
Total Switched Access
Lines (000) 49,413 52,356
==================

Unbundled Loops (000) 1,695 1,537
Long Distance Lines in Service
(000) 23,507 20,868
DSL Lines in Service (000) 6,921 5,104
Net DSL Line Additions (000) 425 425 1,817 1,589
Video Subscribers (000) 457 323
Net Video Subscriber
Additions (000) 38 97 134 323

Cingular Wireless (3)
Wireless Voice Customers (000) 54,144 49,132
Net Customer Additions (000) 1,820 1,699 5,006 3,338
M&A Activity, Partitioned
Customers and Other Adjs. 32 21,761 6 21,767
POPs (000,000) 294 291


----------------------------------------------------------------------
(1) Wholesale lines at 12-31-05 include approximately 1.64 million
lines purchased by AT&T Corp.

(2) Coin includes both retail and wholesale access lines.

(3) Amounts represent 100% results of Cingular Wireless.






----------------------------------------------------------------------
Non-GAAP Financial Data

AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
Dollars in millions
----------------------------------------------------------------------
Unaudited
Three Months Ended Twelve Months Ended
----------------------- ------------------------
12/31/05 12/31/04 % Chg 12/31/05 12/31/04 % Chg
--------------------------------------------- ------------------------
Total Operating
Revenues $21,553 $17,240 25.0% $77,426 $59,750 29.6%
--------------------------------------------- ------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 9,510 7,407 28.4% 32,708 24,529 33.3%
--------------------------------------------- ------------------------
Selling, general and
administrative 6,426 5,509 16.6% 22,508 17,154 31.2%
--------------------------------------------- ------------------------
Depreciation and
amortization 3,936 3,254 21.0% 14,218 10,643 33.6%
--------------------------------------------- ------------------------
Total Operating
Expenses 19,872 16,170 22.9% 69,434 52,326 32.7%
--------------------------------------------- ------------------------
Operating Income 1,681 1,070 57.1% 7,992 7,424 7.7%
--------------------------------------------- ------------------------
Interest Expense 634 531 19.4% 2,402 1,567 53.3%
--------------------------------------------- ------------------------
Interest Income 34 35 -2.9% 118 148 -20.3%
--------------------------------------------- ------------------------
Minority Interest (108) 233 - (316) (146) -
--------------------------------------------- ------------------------
Equity in Net Income
(Loss) of Affiliates 145 (97) - 414 347 19.3%
--------------------------------------------- ------------------------
Other Income (Expense)
- Net - 61 - 31 925 -96.6%
--------------------------------------------- ------------------------
Income Before Income
Taxes 1,118 771 45.0% 5,837 7,131 -18.1%
--------------------------------------------- ------------------------
Income Tax (Benefit) (537) 83 - 1,051 2,152 -51.2%
--------------------------------------------- ------------------------
Income From Continuing
Operations 1,655 688 - 4,786 4,979 -3.9%
--------------------------------------------- ------------------------
Income From
Discontinued
Operations, net of
tax - - - - 908 -
--------------------------------------------- ------------------------
Net Income $1,655 $688 - $4,786 $5,887 -18.7%
============================================= ========================

As required by GAAP rules for joint ventures, AT&T 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 AT&T's
majority economic ownership of the nation's largest wireless provider
and Cingular's increased significance to AT&T's overall operations,
AT&T provides a supplemental consolidated income statement that
includes full consolidation of Cingular's operating results. This
supplemental information also includes reconciliations to AT&T'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

AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
For the Three Months Ended 12/31/05
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $12,966 $8,849 $(262) $21,553
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
mortization shown
separately below) 6,014 3,758 (262) 9,510
----------------------------------------------------------------------
Selling, general and
administrative 3,614 2,812 - 6,426
----------------------------------------------------------------------
Depreciation and
amortization 2,206 1,730 - 3,936
----------------------------------------------------------------------
Total Operating Expenses 11,834 8,300 (262) 19,872
----------------------------------------------------------------------
Operating Income 1,132 549 - 1,681
----------------------------------------------------------------------
Interest Expense 405 292 (63) 634
----------------------------------------------------------------------
Interest Income 92 5 (63) 34
----------------------------------------------------------------------
Minority Interest (1) (7) (100) (108)
----------------------------------------------------------------------
Equity in Net Income (Loss)
of Affiliates 267 1 (123) 145
----------------------------------------------------------------------
Other Income (Expense) - Net 4 (4) - -
----------------------------------------------------------------------
Income Before Income Taxes 1,089 252 (223) 1,118
----------------------------------------------------------------------
Income Tax (Benefit) (566) 48 (19) (537)
----------------------------------------------------------------------
Net Income $1,655 $204 $(204) $1,655
======================================================================



For the Three Months Ended 12/31/04
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $10,287 $7,119 $(166) $17,240
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 4,613 2,939 (145) 7,407
----------------------------------------------------------------------
Selling, general and
administrative 2,563 2,947 (1) 5,509
----------------------------------------------------------------------
Depreciation and
amortization 1,864 1,386 4 3,254
----------------------------------------------------------------------
Total Operating Expenses 9,040 7,272 (142) 16,170
----------------------------------------------------------------------
Operating Income 1,247 (153) (24) 1,070
----------------------------------------------------------------------
Interest Expense 318 303 (90) 531
----------------------------------------------------------------------
Interest Income 116 9 (90) 35
----------------------------------------------------------------------
Minority Interest 1 2 230 233
----------------------------------------------------------------------
Equity in Net Income (Loss)
of Affiliates (298) (114) 315 (97)
----------------------------------------------------------------------
Other Income (Expense) - Net 59 2 - 61
----------------------------------------------------------------------
Income Before Income Taxes 807 (557) 521 771
----------------------------------------------------------------------
Income Tax (Benefit) 119 (62) 26 83
----------------------------------------------------------------------
Net Income $688 $(495) $495 $688
======================================================================










----------------------------------------------------------------------
Non-GAAP Financial Data Reconciliation

AT&T Inc.
----------------------------------------------------------------------
Supplemental Consolidated Income Statements
For the Twelve Months Ended 12/31/05
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $43,862 $34,433 $(869) $77,426
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 19,190 14,387 (869) 32,708
----------------------------------------------------------------------
Selling, general and
administrative 10,861 11,647 - 22,508
----------------------------------------------------------------------
Depreciation and
amortization 7,643 6,575 - 14,218
----------------------------------------------------------------------
Total Operating Expenses 37,694 32,609 (869) 69,434
----------------------------------------------------------------------
Operating Income 6,168 1,824 - 7,992
----------------------------------------------------------------------
Interest Expense 1,456 1,260 (314) 2,402
----------------------------------------------------------------------
Interest Income 383 49 (314) 118
----------------------------------------------------------------------
Minority Interest (2) (102) (212) (316)
----------------------------------------------------------------------
Equity in Net Income (Loss)
of Affiliates 609 5 (200) 414
----------------------------------------------------------------------
Other Income (Expense) - Net 16 15 - 31
----------------------------------------------------------------------
Income Before Income Taxes 5,718 531 (412) 5,837
----------------------------------------------------------------------
Income Tax (Benefit) 932 198 (79) 1,051
----------------------------------------------------------------------
Net Income $4,786 $333 $(333) $4,786
======================================================================


For the Twelve Months Ended 12/31/04
Dollars in millions
----------------------------------------------------------------------
Unaudited Reported Non-GAAP
---------------- -------------------------
Consolidating Supplemental
AT&T Cingular Adjustments Consolidated
----------------------------------------------------------------------
Total Operating Revenues $40,787 $19,565 $(602) $59,750
----------------------------------------------------------------------
Operating Expenses
Cost of sales (exclusive
of depreciation and
amortization shown
separately below) 17,515 7,611 (597) 24,529
----------------------------------------------------------------------
Selling, general and
administrative 9,807 7,349 (2) 17,154
----------------------------------------------------------------------
Depreciation and
amortization 7,564 3,077 2 10,643
----------------------------------------------------------------------
Total Operating Expenses 34,886 18,037 (597) 52,326
----------------------------------------------------------------------
Operating Income 5,901 1,528 (5) 7,424
----------------------------------------------------------------------
Interest Expense 1,023 900 (356) 1,567
----------------------------------------------------------------------
Interest Income 492 12 (356) 148
----------------------------------------------------------------------
Minority Interest 1 (86) (61) (146)
----------------------------------------------------------------------
Equity in Net Income (Loss)
of Affiliates 873 (415) (111) 347
----------------------------------------------------------------------
Other Income (Expense) - Net 921 4 - 925
----------------------------------------------------------------------
Income Before Income Taxes 7,165 143 (177) 7,131
----------------------------------------------------------------------
Income Tax (Benefit) 2,186 (58) 24 2,152
----------------------------------------------------------------------
Income From Continuing
Operations 4,979 201 (201) 4,979
----------------------------------------------------------------------
Income From Discontinued
Operations, net of tax 908 - - 908
----------------------------------------------------------------------
Net Income $5,887 $201 $(201) $5,887
======================================================================



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