Filed by SBC Communications Inc.

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-6

of the Securities Exchange Act of 1934

 

 

Subject Company: AT&T Corp.

Commission File No.: 1-01105

 

 

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Filed by SBC Communications Inc.

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-6

of the Securities Exchange Act of 1934

 

 

Subject Company: AT&T Corp.

Commission File No.: 1-01105

 

SBC Investor Update

 

Rick Lindner

Senior Executive Vice President and Chief Financial Officer

SBC Communications Inc.

 

 

Lehman Brothers

 

[LOGO]

Worldwide Wireless and Wireline Conference

 

 

 

 

 

June 1, 2005

 

 

1



 

Cautionary Language Concerning Forward-Looking Statements

 

Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in SBC’s filings with the Securities and Exchange Commission. SBC disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise.

 

This presentation 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/investor_relations.

 

2



 

SEC Rule 165 Information

 

In connection with the proposed transaction, SBC filed a registration statement, including a  proxy statement of AT&T Corp., with the Securities and Exchange Commission (the “SEC”)  on March 11, 2005 (File No. 333-123283). Investors are urged to read the registration and  proxy statement (including all amendments and supplements to it) because it contains  important information. Investors may obtain free copies of the registration and proxy statement,  as well as other filings containing information about SBC and AT&T Corp., without charge, at the SEC’s  Internet site (www.sec.gov). These documents may also be obtained for free from SBC’s Investor  Relations Web site (www.sbc.com/investor_relations) or by directing a request to SBC Communications  Inc., Stockholder Services, 175 E. Houston, San Antonio, Texas 78205. Free copies of AT&T Corp.’s  filings may be accessed and downloaded for free at the AT&T Investor Relations Web Site  (www.att.com/ir/sec) or by directing a request to AT&T Corp., Investor Relations, One AT&T Way,  Bedminster, New Jersey 07921.

 

SBC, AT&T Corp. and their respective directors and executive officers and other members of  management and employees may be deemed to be participants in the solicitation of proxies from AT&T  shareholders in respect of the proposed transaction. Information regarding SBC’s directors and executive  officers is available in SBC’s proxy statement for its 2005 annual meeting of stockholders, dated March  11, 2005, and information regarding AT&T Corp.’s directors and executive officers is available in the  registration and proxy statement. Additional information regarding the interests of such potential  participants is included in the registration and proxy statement and other relevant documents filed with  the SEC.

 

3



 

Industry Overview:

Significant Areas of Opportunity

 

Broadband

 

                  2.4 million high-speed Internet net adds in 1Q05 from RBOCs plus eight largest cable companies

 

                  Key foundation product

 

4



 

Broadband

 

Wireless

 

                  12.8 million subscribers added by five largest U.S. carriers over past two quarters

 

5



 

Broadband

 

Wireless

 

Bundling => Integration

 

                  Wireline/wireless

 

                  Broadband+voice wireless, TDM, VoIP

 

                  Next-generation IP-based voice, data and video

 

6



 

Broadband

 

Wireless

 

Bundling => Integration

 

Business Space

 

                  Small/medium and enterprise

 

                  Network security and IP-based solutions

 

7



 

Broadband

 

Wireless

 

Bundling => Integration

 

Business Space

 

Cost Structure

 

                  Improved processes, streamlined operations

 

                  Enhanced customer experience

 

8



 

SBC: Clear Focus, Strong Execution

 

Broadband

 

Wireless

 

Bundling Integration

 

Business Space

 

Cost Structure

 

Over the past year, through solid execution and major strategic actions, SBC has substantially strengthened its position, and led the industry forward, in these key areas.

 

9



 

SBC Execution:

Industry-Leading DSL Growth

 

1Q05 Net Gain in Total DSL and Cable Modem Lines

(in thousands)

 

[CHART]

 

                  27.6 percent DSL/Internet revenue growth in 1Q05

 

                  5.6 million DSL lines in service, more than 40 percent greater than closest RBOC peer

 

10



 

SBC Execution: Consumer DSL

Penetration Approaching 20 Percent

 

SBC DSL Penetration of Consumer Primary Lines

 

[CHART]

 

                  Penetration in the West, SBC’s strongest DSL region, exceeds 24 percent

 

                  Accelerated net adds for three consecutive quarters

 

11



 

Cingular Wireless:

Premier Set of Wireless Assets

 

Customer Base

 

50.4 million

 

 

 

Coverage

 

292 million licensed POPs

 

 

All top 100 markets

 

 

 

Network

 

Nation’s largest all-digital voice and data network

 

 

UMTS with HSDPA deployment expected in 15 to 20 markets by end of this year

 

Merger initiatives on track. Cingular expects to achieve industry leading metrics including churn and margins by end of 2007

 

12



 

Cingular Execution:

Strong Subscriber Growth

 

Cingular Net

Subscriber Additions

(in millions)

 

[CHART]

 

In 1Q05 …

 

                  High-quality growth with 79% of net adds postpaid

 

                  Churn declined to 2.2% overall and 1.9% postpaid

 

Pro forma” results reflect acquisitions and dispositions, including the acquisition of AT&T Wireless, as if they had occurred on Jan. 1, 2004

 

13



 

Cingular Execution:

Rapid Subscriber Migration

 

GSM Migration

 

[CHART]

 

                  In 1Q05 approximately 9 percent of Cingular subscriber base upgraded handsets, almost all onto GSM

 

                  Since Nov. 15, 2004, 3 million former AT&T Wireless subscribers have converted to Cingular plans

 

14



 

Cingular Execution: ARPU Stabilizing,

Data Services Growing

 

Service ARPU

YOY Growth Rate

 

[CHART]

 

Data ARPU

 

[CHART]

 

3Q04 data ARPU is for Cingular stand-alone.

 

                  More than 40 million subscribers have data enabled phones

 

                  Substantial upside opportunity with 1/3rd of customer base active data users

 

15



 

Cingular Opportunities

 

Data Services

 

EDGE today

 

UMTS deployment – voice, data and video ... all IP

 

 

 

Business Markets

 

Dedicated Business Markets Group

 

 

 

Wireline Wireless Integration

 

Today: bundling, shared sales channels, unified messaging

Future: Unified experience, handsets that enable seamless transition between networks

 

16



 

Bundling => Integration:

Penetration, ARPU Growth

 

Key-Product Bundles

Percent of consumers with bundles

that include one or more key services –

LD, DSL, satellite and jointly billed wireless

 

[CHART]

 

                  Four consecutive quarters in consumer retail ARPU growth above 8 percent

 

17



 

SBC Retail Connection Growth

 

Net Adds - SBC Consumer

Retail Connections

Retail consumer access lines, retail consumer

DSL lines, and retail consumer video subscribers

(in thousands)

 

[CHART]

 

                  Three straight quarters of growth in retail connections, with 674,000 total net gain over that period

 

                  Four straight quarters of consumer revenue growth, with improved growth rates every quarter … up 3.9% in 1Q05

 

18



 

Competing with Cable Telephony

 

                  Exposure limited by a number of factors

 

                  Households with cable

                  Upgraded cable plant

                  Homes with broadband service

 

                  Well-positioned to compete

 

                  High bundle and broadband penetration

                  Reputation for service quality

                  Competitive pricing

 

                  Creating differentiated service offerings

 

                  IP-based video

                  Converged services

 

19



 

Bundling => Integration:

Home Zone

 

Planned Features

 

                  Combines SBC Yahoo! DSL with SBC | DISH Network service

 

                  Lets SBC local phone customers view caller ID and call-log information on their TV screens

 

                  Downloads movies on demand, accesses photos and personal music collections

 

                  Enables remote online programming

 

[GRAPHIC]

 

20



 

Bundling => Integration:

Project Lightspeed

 

Project Lightspeed

 

                  Advanced, IP-based network to deliver IP-based TV, super highspeed broadband and IP voice services

 

                  Fiber-to-the-neighborhood and fiber-to-the-premises technologies

 

[LOGO]

 

creating a new universe

 

of communications and entertainment services

 

21



 

SBC Execution: Business Space

 

Access Lines

 

In 1Q05, smallest business access line decline in more than four years

 

 

 

 

 

Enterprise VoIP lines not included

 

 

 

Data Revenues

 

 Up 6.7 percent to $2.8 billion in 1Q05 ... more than one-third greater than closest RBOC peer

 

 

 

Small/Medium

 

Small/medium business revenues up more than 5 percent in 1Q05

 

22



 

Agreement To Acquire AT&T

 

Opportunities

 

                  Best-in-class network assets

 

                  Advanced product sets

 

                  World-class marketing, sales and technical support capabilities

 

                  Substantial synergies driven by clear, achievable cost opportunities

 

Update

 

                  Announced Jan. 31

 

                  Regulatory reviews under way – state, federal, international

 

                  Integration planning teams named, work under way, consistent with applicable legal requirements

 

23



 

SBC Execution: Cost Initiatives

 

                  Transforming call centers to deliver operating efficiencies and a better experience for customers: standardization, new call flow and routing strategies, enhanced desktops

 

                  Deployment of infrastructure >90 percent complete

 

                  More than 20 percent of 1Q05 customer contacts self-serve

 

                  More than 8 million 1Q05 proactive service communications via new automated outbound functionality

 

                  Similar projects under way in network centers

 

                  Disciplined, focused force reductions in concert withprocess improvements

 

24



 

Why SBC?

 

                  Leadership in industry’s key areas of opportunity

 

                  Broadband

 

                  Wireless

 

                  Bundling/Integration

 

                  Business Space

 

                  Cost Structure

 

25



 

                  Leadership in industry’s key areas of opportunity

 

                  Strong execution

 

                  Four consecutive quarters of wireline revenue growth

 

                  Solid progress in cost initiatives

 

                  Improved margins

 

26



 

                  Leadership in industry’s key areas of opportunity

 

                  Strong execution

 

                  Solid cash flow

 

                  Expect to deliver approximately $3 billion of free cash flow for 2005

 

Free cash flow is cash from operations less capital expenditures less dividends plus cash from Cingular.

 

27



 

                  Leadership in industry’s key areas of opportunity

 

                  Strong execution

 

                  Solid cash flow

 

                  Major transactions that offer substantial upside potential

 

                  Cingular Wireless’ acquisition of AT&T Wireless

 

                  Agreement to acquire AT&T

 

28



 

Why SBC: Potential Merger Impacts

 

Reported

 

[CHART]

 

 

 

2005

 

2006

 

2007

 

2008(1)

 

2009(1)

 

AT&T Wireless(1)

 

$(0.21)-$(0.19)

 

$(0.03)-$(0.01)

 

$0.27-$0.30

 

$0.27-$0.30

 

$0.27-$0.30

 

AT&T

 

NA

 

$(0.31)-$(0.28)

 

$(0.15)-$(0.12)

 

$0.09-$0.11

 

$0.23-$0.27

 

 

Excluding Integration Costs and Non-Cash Intangible Amortization

 

[CHART]

 

 

 

2005

 

2006

 

2007

 

2008(1)

 

2009(1)

 

AT&T Wireless(1)

 

$0.07-$0.09

 

$0.15-$0.17

 

$0.40-$0.43

 

$0.40-$0.43

 

$0.40-$0.43

 

AT&T

 

NA

 

$0.00-$0.02

 

$0.07-$0.09

 

$0.23-$0.26

 

$0.28-$0.31

 

 


(1) 2008 & 2009 AT&T Wireless estimates are illustrative only and based on previously released estimates for 2007.

 

29



 

SBC Investor Update

 

Rick Lindner

Senior Executive Vice President and Chief Financial Officer

SBC Communications Inc.

 

30



 

Cautionary Language Concerning Forward-Looking Statements

 

Information set forth in this document contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially  Such statements include, but are not limited to, statements about the benefits of the business combination transaction involving SBC and AT&T Corporation, including future financial and operating results, the new company’s plans, objectives, expectations and intentions and other statements that are not historical facts.  Such statements are based upon the current beliefs and expectations of SBC’s and AT&T’s management and are subject to significant risks and uncertainties.  Actual results may differ from those set forth in the forward-looking statements.

 

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the failure of AT&T shareholders to approve the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues.  Additional factors that may affect future results are contained in SBC’s filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s Web site http://www.sec.gov.  SBC disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise.

 

This document may contain certain non-GAAP financial measures.  Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on SBC’s Web site at www.sbc.com/investor_relations.