To AT&T Investors:

AT&T continued to set the pace for the industry in 2008. We grew revenues and earnings per share. We strengthened our position in key customer segments. And we returned value to stockholders through share buybacks and a strong dividend.

AT&T continued to set the pace for the industry in 2008. We grew revenues and earnings per share. We strengthened our position in key customer segments. And we returned value to stockholders through share buybacks and a strong dividend.

But here’s what I’m most proud of: We delivered those strong results in a very challenging economic environment. Despite the downturn, the demand to stay connected — wirelessly and over the Internet — continues to grow globally.

And we are focused as never before on meeting that demand. In fact, no company is better positioned to capitalize on this growth and deliver on the vision I laid out in these pages last year — to connect people with their world, everywhere they live and work, and do it better than anyone else.

My No. 1 job is to ensure that AT&T grows over the long term, and I’m confident we have what it takes to do that. We have the best brand in telecom. We offer superior networks, products and capabilities. And we’re investing significantly in fast-growing areas to meet the increasing demand for connectivity.

The volatile economy demanded even more financial strength, flexibility and disciplined execution, and we delivered. We spotted the economic slowdown early in the year and quickly moved to reduce costs without sacrificing growth opportunities or customer service. As a result, we ended 2008 as we began it — financially strong, with world-class operations and clear market leadership.

In 2009, we plan to repeat that performance, in what continues to be a challenging environment. Our success is reflected in our 2008 financial highlights: Reported consolidated revenues were up more than 4 percent to $124 billion.

Reported earnings per share grew 11.3 percent to $2.16 per share. We returned $15.6 billion to stockholders through dividends and share repurchases.

We also delivered strong cash flow, enabling us to achieve our 25th consecutive year of dividend growth by increasing our quarterly dividend 2.5 percent in December. Our commitment to create long-term value for our owners underpins all our plans.

Delivering more of what customers want Around the world, businesses and consumers are looking for more mobility, connectivity and speed. They are hungry for expanded access to Internet applications and content and for seamless integration of devices, networks and services. They can’t get enough of the communications capabilities that make their lives better and their businesses more productive.

AT&T is in the best position to satisfy this demand. We’ve built our business around the pillars of mobility, data and Internet Protocol (IP) to provide the fully integrated, everywhere connectivity that our customers want and expect.

Among our accomplishments during the past year:

Mobility
In 2008, AT&T added more wireless subscribers than any other U.S. provider, led the industry in wireless data growth and had twice as many smartphones in service than any of our competitors.

One of the keys to this growth was the industry-shaping product launches that have become our hallmark. Our exclusive U.S. launch of Apple iPhone 3G was a blockbuster hit — and arguably the most important consumer product rollout of the past decade. This device has dramatically redefined the wireless smartphone market.

In the first six months after launch, we activated 4.3 million iPhone 3Gs. What’s more, about 40 percent of those customers were new to AT&T. Another AT&T exclusive — the BlackBerry® BoldTM — was one of the top-rated business wireless broadband devices introduced last year. It gave our customers a whole new level of mobile connectivity.

iPhone 3G and other wireless data devices strengthened our leadership in mobile data. Our full-year wireless data revenues grew 52.5 percent to more than $10.5 billion. As customers increasingly access data wirelessly, we’ve also seen per-subscriber revenues rise. And as wireless data usage continues to expand and as more devices can connect wirelessly, we’re investing aggressively to build on our industry leadership.

TV
More than 1 million customers now subscribe to AT&T U-verseSM TV service. They were attracted to U-verse’s great features, such as High Definition (HD) channels and Total Home DVR, which allows recordings to be accessed on multiple TVs in a single home.

We’re proud that U-verse ranked highest in customer satisfaction in the North Central, South and West regions according to the J.D. Power and Associates 2008 Residential Television Service Satisfaction Study.

Business
AT&T continues to set the standard for serving the complex connectivity needs of businesses worldwide. We help them stay connected with their employees and customers through a broad array of IP-based networking solutions that allow them to extend their reach, reduce costs and seize competitive advantage.

AT&T is the industry leader, serving millions of businesses, including all of the Fortune 1000, and operating on six continents. And we built on this No. 1 position last year — winning global contracts with such companies as Shell, Starbucks, Boeing, Smiths and Best Buy. We also captured significant new regional business, including with the state governments of Tennessee and Georgia. And we turned around our wholesale business with big wins made possible by our strategic alliance with IBM.

AT&T was recognized as a leader in serving businesses of all sizes by industry analyst firms, including IDC and Compass Intelligence.

Local search
YELLOWPAGES.COM — which connects people with local businesses through wireless devices, PCs and AT&T U-verse TV — continues to grow rapidly, with more than 1.8 billion local searches across the YELLOWPAGES.COM network in 2008. AT&T also continues to lead in print local search with AT&T Real Yellow Pages.

IP network bandwidth
To stay ahead of customer demand for mobility and speed, we expanded our fastest-in-the-U.S. 3G wireless network to nearly 350 major metropolitan areas and strengthened our No. 1 position in mobile data. We also extended our industry-leading Wi-Fi hotspot footprint to nearly 20,000 U.S. hotspots and a total of more than 80,000 worldwide.

We more than doubled the living units passed by our AT&T U-verse network to nearly 17 million.
We continued to invest in fixed-line broadband, launching a new 18-megabit-per-second broadband service in several U.S. markets where we’ve deployed our U-verse network.

To support our customers’ growing desire to access data, software applications and video at higher speeds, we completed the world’s largest deployment of 40-gigabit-per-second transport — the fastest available Internet backbone technology — across our entire U.S. network.

Across the board, we have significantly improved our ability to deliver more for customers. In the process, AT&T has become a much different company than we were just two years ago. Today, nearly two-thirds of our revenues come from wireless and data — including IP, broadband and video — areas where we expect robust growth in the years ahead.

Disciplined leadership and execution
No one knows for certain when the economy will improve. But I can promise you that we will continue to follow a proven strategy to manage through downturns.

We are pursuing every avenue to control expenses and improve processes. We are prioritizing investments to capitalize on our growth opportunities. And we will continue to maintain a strong balance sheet. Behind these efforts is a seasoned, disciplined leadership team that knows how to execute.

Our objective is to drive cash flow, enabling us to create long-term value for stockholders and invest in AT&T’s future. I have every confidence that we will emerge stronger than our competitors when the economy recovers.

I’m just as confident in our ability to generate long-term growth by strategically investing in areas that build on our industry leadership: Adding mobility to meet our customers’ growing need to connect and access content and applications anytime and from more places.

Delivering more bandwidth to support the exploding volume of traffic that travels over our networks. Expanding our scale to provide connectivity to more people in more locations. Delivering additional valueadded applications and services efficiently and seamlessly over our networks.

Investing in our communities, our environment
We remain committed to investing in our communities, too. That includes bringing 3,000 jobs back to our U.S. payrolls. It’s part of our total commitment to return 5,000 jobs, most of which were previously outsourced offshore by our vendors.

As always, our employees reached out to help their neighbors, from rebuilding efforts in the wake of devastating storms to mentoring students through job shadowing initiatives. And AT&T supports their good work with charitable dollars, including our $100 million AT&T Aspire initiative to combat high dropout rates in U.S. high schools.

We also recognize our responsibility to minimize our impact on the environment. So, we’re more committed than ever to sustainable operations. We formed an Energy Council, comprised of executives across the company, to improve and optimize energy efficiencies. We use alternative energy where possible and have expanded the use of alternative-fuel vehicles in our fleet.

What sets AT&T apart Let me leave you with a couple of thoughts: Our long-term future remains very bright. The underlying global demand for connectivity continues to grow — and no company is better positioned to meet it than AT&T. My confidence flows from the knowledge that we offer the best products and services in every customer segment.

As a result, we expect continued revenue growth in 2009. When the economy rebounds, we will be ready to capitalize on our financial strength, our market leadership and our disciplined investment strategy to accelerate revenue growth beyond our current expectations.

I’m also confident that the people of AT&T — with their competitive drive, their passion to serve and their commitment to innovation — will be a significant competitive advantage as we continue to lead our industry.

Our employees are a big reason why AT&T has been named the world’s most admired telecommunications company by Fortune magazine nine of the past 12 years. I thank them for all they do.

Finally, I thank you, our investors, for your continuing confidence. We have substantial opportunities ahead of us to deliver more for our customers and to build value for you. I look forward to reporting on our continuing progress.

Sincerely,
Randall Stephenson
Chairman, Chief Executive Officer and President
February 17, 2009

Download AT&T Inc. 2008 Annual Report

PDF format, 5.4MB, 84Pages.

Connect people with their world, everywhere they live and work, and do it better than anyone else.

AT&T Inc.
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AT&T Inc. (AT&T) is a provider of telecommunications services in the United States. It offers its services and products to consumers in the United States, and services and products to businesses and other providers of telecommunications services worldwide. The services and products that it offers vary by market, and include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, wholesale services and directory advertising and publishing.

Its traditional wireline local exchange subsidiaries operate in 22 states: Alabama, Arkansas, California, Connecticut, Illinois, Indiana, Florida, Georgia, Kentucky, Louisiana, Kansas, Michigan, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Wisconsin (22-state area). In March 2008, Black Box Corporation acquired AT&T's NEC TDM voice CPE business line in AT&T's southeast region. (Google Finance)

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