AT&T Wireless 2008 Annual Report Download - page 43

AT&T Annual Report 2008
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During 2007, our primary source of funds was cash from
operating activities of $34,242 compared to $15,688 in 2006.
Operating cash flows increased primarily due to an increase
of more than $4,500 in operating income reflecting additional
cash provided by the BellSouth acquisition and our success
in achieving merger synergies and operational efficiencies,
partially offset by increased interest payments of approximately
$1,800 and tax payments of $1,200. Tax payments were
higher due primarily to a $1,000 deposit related to the IRS
examination of our 2000 – 2002 income tax returns.
Cash Used in or Provided by Investing Activities
During 2008, cash used in investing activities consisted of:
 • $19,676incapitalexpenditures,excludinginterest
during construction.
 • $659ininterestduringconstruction.
 • $9,497forthepurchaseofspectrumlicensesincluding
the 700 MHz Band wireless spectrum auction and the
acquisition of licenses from Aloha Partners, L.P.
 • $350relatedtoacustomerlistacquisition.
 • $697relatedtovariouswireless-relatedacquisitions.
 • $275fortheacquisitionofWayport.
 • $153relatedtootheracquisitions.
During 2008, cash provided by investing activities
consisted of:
 • $1,501fromdispositionsofnon-strategicassets.
 • $436fromEchoStarfromaninvestmentmadein2003.
 • $114fromthesaleofmarketableandequitysecurities.
 • $113relatedtootheractivities.
Our capital expenditures are primarily for our wireless and
wireline subsidiaries’ networks, our U-verse services, and
support systems for our communications services. Capital
spending (excluding interest during construction) in our
wireless segment increased 42.1% in 2008, primarily for
network capacity expansion, integration and upgrades to our
Universal Mobile Telecommunications System/High-Speed
Packet Access network, as well as for IT and other support
systems for our wireless service. Capital expenditures in the
wireline segment, which represented 69.4% of our capital
expenditures, increased 2.5% in 2008, primarily due to the
continued deployment of our U-verse services.
The other segment capital expenditures were less than 2%
of total capital expenditures for 2008. Included in the other
segment are equity investments, which should be self-funding
as they are not direct AT&T operations; as well as corporate,
diversified business and Sterling operations, which we expect
to fund using cash from operations. We expect to fund any
advertising & publishing segment capital expenditures using
cash from operations.
Cash Used in or Provided by Financing Activities
In December 2007, our Board of Directors authorized a new
share repurchase plan of 400 million shares, which replaces
our previous share repurchase authorization from March 2006.
During 2008, we repurchased 164 million shares at a cost of
$6,077. These 2008 share repurchases are the only ones
made under the current authorization. This new authorization
represents approximately 6.7% of AT&T’s shares outstanding
at December 31, 2008 and expires at the end of 2009.
We have repurchased, and may continue to repurchase, a
portion of the shares pursuant to plans that comply with
the requirements of Rule 10b5-1(c) under the Securities
Exchange Act of 1934. We will fund any additional share
repurchases through a combination of cash from operations,
borrowings dependent upon market conditions, and cash
from the disposition of certain non-strategic investments.
However, we anticipate concentrating on reducing debt
levels rather than share repurchases in 2009.
We paid dividends of $9,507 in 2008, $8,743 in 2007
and $5,153 in 2006, reflecting the issuance of additional
shares for the BellSouth and ATTC acquisitions and dividend
rate increases. In December 2008, our Board of Directors
approved a 2.5% increase in the quarterly dividend from
$0.40 to $0.41 per share. This increase recognizes our
expectations for growth and follows a 12.7% dividend
increase approved by AT&T’s Board in December 2007.
Dividends declared by our Board of Directors totaled
$1.61 per share in 2008, $1.465 per share in 2007 and
$1.35 per share in 2006. Our dividend policy considers both
the expectations and requirements of stockholders, internal
requirements of AT&T and long-term growth opportunities.
It is our intent to provide the financial flexibility to allow
our Board of Directors to consider dividend growth and to
recommend an increase in dividends to be paid in future
periods. All dividends remain subject to approval by our
Board of Directors.
At December 31, 2008, we had $14,119 of debt maturing
within one year, which included $9,503 of long-term debt
maturities and $4,616 of commercial paper borrowings and
other borrowings. Most of our commercial paper borrowings
are due within 90 days. We continue to examine our mix of
short- and long-term debt in light of interest rate trends
and current credit market conditions.
During 2008, we received net proceeds of $12,416 from
the issuance of $12,475 in long-term debt. Debt proceeds
were used for general corporate purposes and parts of the
proceeds were used for repurchases of our common stock.
Long-term debt issuances consisted of:
 • $2,500of5.5%globalnotesduein2018.
 • $2,000offloatingratenotesdue2010inaprivate
offering, which can be redeemed by the holder early
(which is classified as debt maturing in one year).
 • €1,250of6.125%globalnotesdue2015(equivalent
to approximately $1,975 when issued).
 • $1,500of4.95%globalnotesduein2013.
 • $1,250of6.4%globalnotesdue2038.
 • $1,000of5.6%globalnotesdue2018.
 • $750of6.3%globalnotesduein2038.
 • $1,500of6.7%globalnotesduein2013.
Beginning in May 2009, a $500 zero-coupon puttable note
may be presented for redemption by the holder at specified
dates but not more frequently than annually, excluding 2011.
If the note is held to maturity in 2022, the redemption
amount will be $1,030.
In November 2008, we agreed to acquire Centennial
Communications, a wireless operator in portions of the
United States and Puerto Rico, including its outstanding
debt of approximately $2,000. All of Centennial’s debt was
callable after January 2009. The various debt agreements
contain a number of restrictive operating covenants, which
make it likely that we will call such debt upon closing of
the acquisition.