AT&T Wireless 2012 Annual Report Download - page 33

AT&T Inc. | 31
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Dollars in millions except per share amounts
Operating revenues increased $711, or 0.6%, in 2012 and
$2,443, or 2.0%, in 2011. The increases in 2012 and 2011 are
primarily due to growth in wireless service and equipment
revenues and higher wireline data revenues from U-verse and
strategic business services. Growth in the wireless subscriber
base and the increasing percentage of subscribers using
smartphones also contributed to the revenue increase in
2011. These increases were partially offset by continued
declines in wireline voice revenues for both years. The sale
of our Advertising Solutions segment in May 2012 reduced
revenues $2,244.
Revenue growth continues to be tempered by declines in
our voice revenues. During 2012, total switched access lines
decreased 13.2%. Customers disconnecting access lines
switched to wireless, Voice over Internet Protocol (VoIP) and
cable offerings for voice and data or terminated service
permanently as businesses closed or consumers left residences.
While we lose wireline voice revenues, we have the opportunity
to increase wireless service and wireline data revenues should
customers choose us as their wireless provider, and for
customers with our U-verse service, as their VoIP provider.
OVERVIEW
Operating income increased $3,779, or 41.0%, in 2012 and
decreased $10,355, or 52.9%, in 2011. Our operating margin
was 10.2% in 2012, compared to 7.3% in 2011 and 15.7% in
2010. Operating revenues and expenses for 2012 reflect only
a partial year’s results for our sold Advertising Solutions
segment, as discussed below. Operating income for 2012
reflects continued growth in wireless service and equipment
revenue driven mostly by data revenue growth and increased
revenues from AT&T U-verse® (U-verse) services and strategic
business services, partially offset by a decline in voice
revenues and higher wireless handset subsidies and
commissions. Our 2012 operating income also reflects a
noncash charge of $9,994 from actuarial losses related to
pension and postemployment benefit plans. Operating
income for 2011 and 2010 included actuarial losses of
$6,280 and $2,521, respectively. Operating income in 2011
also reflected charges of $4,181 related to our decision to
terminate the acquisition of T-Mobile USA, Inc. (T-Mobile)
and noncash charges of $2,910 related to impairments of
directory intangible assets.
For ease of reading, AT&T Inc. is referred to as “we,” “AT&T” or the “Company” throughout this document, and the names of the
particular subsidiaries and affiliates providing the services generally have been omitted. AT&T is a holding company whose
subsidiaries and affiliates operate in the communications services industry in both the United States and internationally,
providing wireless and wireline telecommunications services and equipment. You should read this discussion in conjunction
with the consolidated financial statements and accompanying notes. A reference to a “Note” in this section refers to the
accompanying Notes to Consolidated Financial Statements. In the tables throughout this section, percentage increases and
decreases that are not considered meaningful are denoted with a dash.
RESULTS OF OPERATIONS
Consolidated Results Our financial results are summarized in the table below. We then discuss factors affecting our overall
results for the past three years. These factors are discussed in more detail in our “Segment Results” section. We also discuss
our expected revenue and expense trends for 2013 in the “Operating Environment and Trends of the Business” section.
Percent Change
2012 vs. 2011 vs.
2012 2011 2010 2011 2010
Operating Revenues $127,434 $126,723 $124,280 0.6% 2.0%
Operating expenses
Cost of services and sales 55,215 54,836 50,257 0.7 9.1
Selling, general and administrative 41,079 41,382 34,986 (0.7) 18.3
Impairment of intangible assets — 2,910 85 — —
Depreciation and amortization 18,143 18,377 19,379 (1.3) (5.2)
Total Operating Expenses 114,437 117,505 104,707 (2.6) 12.2
Operating Income 12,997 9,218 19,573 41.0 (52.9)
Interest expense 3,444 3,535 2,994 (2.6) 18.1
Equity in net income of affiliates 752 784 762 (4.1) 2.9
Other income (expense) – net 134 249 897 (46.2) (72.2)
Income from continuing operations before income taxes 10,439 6,716 18,238 55.4 (63.2)
Income from continuing operations 7,539 4,184 19,400 80.2 (78.4)
Net Income Attributable to AT&T $ 7,264 $ 3,944 $ 19,864 84.2% (80.1)%