8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) July 25, 2006

AT&T INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-8610	43-1301883
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

175 E. Houston, San Antonio, Texas	78205
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (210) 821-4105

__________________________________

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

[ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items 2.02 Results of Operations and Financial Condition.

The registrant announced on July 25, 2006, its results of operations for the second quarter of 2006. The text of the press release and accompanying financial information are attached as exhibits and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibits are furnished as part of this report:

(c)   Exhibits

99.1 Press release dated July 25, 2006 reporting financial results for the second quarter ended June 30, 2006.

99.2 AT&T Inc. selected financial statements and operating data.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AT&T INC.
Date: July 25, 2006	By: /s/ John J. Stephens John J. Stephens Senior Vice President and Controller

EX-99

 

News Release

For more information, contact:

Anne Vincent

(210) 352-6958

avincent@attnews.us

AT&T Delivers Strong Second-Quarter Earnings Growth Driven by Merger Integration Progress, Solid Wireline Execution, Advances at Cingular Wireless

• $0.46 reported earnings per diluted share, up 53.3 percent versus the year-earlier second quarter

• $0.58 earnings per diluted share before merger-related costs, up 34.9percent versus comparable results in the second quarter of2005

• Consolidated operating income margin up substantially to 16.5 percent on a reported basis, 19.0 percent before merger-related costs; full-year margin outlook raised

• Cash from operating activities up 24.1 percent versus the second quarter of 2005 to $4.7 billion

• 1.5 million second-quarter net subscriber gain at Cingular Wireless to reach 57.3 million; 1.7 percent total subscriber churn, 1.5 percent postpaid – both down significantly over past three quarters

Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. EDT on Tuesday, July 25, 2006, at www.att.com/investor.relations.

SAN ANTONIO, July 25, 2006 – AT&T Inc. (NYSE: T) today reported strong second-quarter earnings growth driven by progress in merger integration, solid execution in wireline operations and increased contributions from Cingular Wireless, which is 60-percent owned by AT&T.

AT&T’s second-quarter earnings per diluted share were $0.46 on a reported basis,

up 53.3 percent versus the year-earlier quarter. Before merger-related costs, earnings per diluted share were $0.58, up 34.9 percent versus comparable adjusted results in the second quarter of 2005. This marked AT&T’s fifth consecutive quarter of double-digit growth in earnings per share before merger-related costs.

Second-quarter net income totaled $1.8 billion on a reported basis, up 80.8 percent from the year-earlier quarter. Before merger-related costs, earnings were $2.3 billion, up 59.6 percent from pre-merger results in the second quarter of 2005. Cash from operating activities totaled $4.7 billion, up 24.1 percent versus the year-earlier second quarter.

AT&T Inc. 2Q 2006 Earnings – Page 2

"We delivered another strong quarter, with excellent growth in both earnings and cash flow,” said Edward E. Whitacre Jr., AT&T chairman and chief executive officer. "Cingular generated solid subscriber growth and its best-ever churn. Enterprise trends continue to be encouraging. Regional wireline revenues extended their growth record. Our SBC/AT&T merger integration projects are very much on plan, generating synergies and benefiting customers.

“These results demonstrate strong momentum as we look forward to the second half of the year and completion of our pending acquisition of BellSouth,” Whitacre added. “Last week, shareowners of both companies approved the merger, and we expect to receive the remaining regulatory approvals necessary for closing the transaction this fall.

“Now that the shareowner votes are complete, we plan to ramp up the share repurchase program we outlined in March,” Whitacre said. “We expect to buy back $10 billion of our shares by the end of 2007, with approximately $2 billion to $3 billion coming this year.”

Consolidated Financial Results

On Nov. 18, 2005, SBC Communications Inc. completed its acquisition of AT&T Corp. and adopted AT&T Inc. as its name. Reported results for the second quarter of 2006 include costs related to this merger as well as Cingular Wireless' fourth-quarter 2004 acquisition of AT&T Wireless. In the second quarter, AT&T's portion of Cingular's $499 million of merger integration and noncash intangible amortization costs amounted to $0.05 per diluted share, and SBC/AT&T merger integration and noncash intangible amortization costs amounted to $397 million, or $0.07 per diluted share.

• On a reported basis, AT&T's second-quarter earnings per diluted share were $0.46, up 53.3 percent from $0.30 in the second quarter of 2005.

• Excluding the items noted above, second-quarter adjusted earnings were $0.58 per diluted share, up 34.9 percent versus comparable adjusted earnings of $0.43 per diluted share in the year-earlier quarter. Adjusted results for the second quarter of 2005 exclude AT&T's portion of Cingular's $649 million of merger integration and noncash intangible amortization costs, which amounted to $0.08 per diluted share, and an AT&T merger-related charge of $236 million, or $0.05 per diluted share, for termination of agreements with WilTel Communications.

AT&T Inc. 2Q 2006 Earnings – Page 3

Major drivers of earnings-per-share growth were increased contributions from Cingular Wireless and AT&T’s wireline operations, partially offset by an increased number of shares outstanding due to the acquisition of AT&T Corp. Reported results for the second quarter of 2005 do not include results from AT&T Corp.

AT&T's reported second-quarter 2006 net income was $1.8 billion versus a pre-merger $1.0 billion in the year-earlier second quarter. Excluding the items noted above, second-quarter earnings were $2.3 billion, compared with second-quarter 2005 earnings of $1.4 billion before merger-related costs.

Second-quarter consolidated revenues totaled $15.8 billion, up 53.2 percent from

a pre-merger $10.3 billion in the second quarter of 2005 and up 0.1 percent sequentially.

Second-quarter operating expenses totaled $13.2 billion on a reported basis, up from a pre-merger $8.8 billion in the year-earlier quarter but down 2.9 percent sequentially.

Expense trends reflect early results from SBC/AT&T integration and progress in operational initiatives.

Second-quarter operating income totaled $2.6 billion on a reported basis, up

71.5 percent from a pre-merger $1.5 billion in the year-earlier quarter. Before merger-related costs, operating income was $3.0 billion, up 71.1 percent versus $1.8 billion in the year-earlier quarter.

AT&T's second-quarter operating income margin was 16.5 percent on a reported basis, up from 14.7 percent in the year-earlier second quarter. Before merger-related expenses, AT&T’s operating income margin was 19.0 percent versus 17.0 percent in the second quarter of 2005.

AT&T’s second-quarter cash from operating activities totaled $4.7 billion, up 24.1 percent from $3.8 billion the year-earlier quarter. Year to date, cash from operations totaled $7.2 billion, up 42.0 percent from $5.0 billion in the first half of 2005.

Wireline Highlights

AT&T’s wireline segment includes the combined former SBC and former AT&T Corp. wireline operations. Second-quarter 2006 wireline results reflect continued solid progress in merger integration, expanded margins and revenue trends that were consistent with first-quarter 2006 results.

AT&T Inc. 2Q 2006 Earnings – Page 4

Total wireline revenues in the second quarter were $14.8 billion, up 59.3 percent versus a pre-merger $9.3 billion reported in the second quarter of 2005 and up 0.1 percent from results in the first quarter of this year.

In addition to reported results, AT&T is providing supplementary quarterly wireline revenue comparisons to pro forma results for 2005 to give investors additional background on trends in the business. These pro forma revenues combine results from the former SBC and the former AT&T Corp., with segments and categories consistent in all periods.

Versus pro forma results for the second quarter of 2005, AT&T’s second-quarter 2006 wireline revenues declined 5.0 percent. This compares with a 5.5 percent year-over-year pro forma decline in the first quarter of this year. More than two-thirds of AT&T’s year-over-year wireline revenue decline in the second quarter came from former AT&T Corp. national mass markets – primarily stand-alone long distance and local bundled services – where AT&T Corp. discontinued proactive marketing in 2004. Excluding results from this customer category, wireline revenues declined 1.8 percent year over year and grew 0.7 percent sequentially.

Wireline second-quarter customer highlights include:

• Solid growth in regional small/medium-business revenues – up 4.9 percent versus pro forma results for the year-earlier quarter to $2.0 billion. This growth reflects positive trends in both data and voice services. Data revenues in this category grew 14.3 percent, driven by strength in transport and IP-based services.

• Continued growth in regional consumer revenues – up 1.5 percent to $3.6 billion, driven by a 637,000 increase in consumer connections over the past year to 33.1 million. Consumer connections is a measure that combines retail access lines plus DSL lines and video connections. Total DSL lines increased by 342,000 to 7.8 million – up more than 1.8 million, or 30.3 percent, over the past year. AT&T | DISH Network satellite television connections increased by 42,000 to reach 533,000 in service. Additional lines declined by 106,000, consistent with results over the past several quarters, in large part due to the migration from dial-up Internet access to DSL. Primary consumer lines declined by 320,000, reflecting second-quarter seasonality in addition to migrations to wireless, cable and other competitors. Primary consumer line and DSL line disconnections are both typically higher in the second quarter due to end-of-college-year moves. In June, the company announced the initial

AT&T Inc. 2Q 2006 Earnings – Page 5

expansion of its AT&T U-verse^SM services in San Antonio, the first market where the services are commercially available. AT&T U-verse services include next-generation television (IPTV) and high speed Internet offerings powered by Project Lightspeed, the company’s initiative to expand its fiber-optics network deeper into neighborhoods. AT&T is pleased with initial results and expects to offer its U-verse services in 15 to 20 markets (metropolitan statistical areas) within its traditional 13-state wireline area by the end of 2006. Markets beyond San Antonio are expected to be launched late in the fourth quarter, generally following the deployment plan being used in San Antonio.

• Stabilizing enterprise revenues of $4.4 billion – essentially flat with results in the first quarter of this year, reflecting continued strong volume growth along with double-digit growth in IP data services. The second quarter’s 0.3 percent sequential decline in enterprise revenues compares with a sequential decline of 3.8 percent in the first quarter of this year. Versus pro forma results for the second quarter of 2005, enterprise revenues declined 7.5 percent. Excluding revenues from a payphone unit that the former AT&T Corp. sold in June of 2005, enterprise revenues would have declined 6.9 percent.

Wireline revenue comparisons reflect the movement of certain accounts during the second quarter of 2006 between customer categories, resulting in reclassified revenues between those categories for the current and past quarters. These movements correspond with changes in how the company serves customers as it continues to integrate operations. The changes affect previously reported revenues and trends in several customer categories and include moving $138 million of fourth-quarter 2004 carrier revenues from the enterprise customer category to wholesale. Total quarterly wireline revenues and product revenues were not affected by the changes. Additional adjustments may take place in future quarters as the company further integrates operations. Financial data that include the changes are on the Investor Relations page of AT&T’s Web site under the heading “Financial & Operational Results.”

Wireless Results

Cingular Wireless’ second-quarter results were driven by continued strong subscriber growth, its lowest-ever churn levels and further margin expansion as it integrates operations and strengthens network performance. In the second quarter:

AT&T Inc. 2Q 2006 Earnings – Page 6

• Cingular posted a net subscriber gain of 1.5 million and ended the quarter with 57.3 million subscribers, an increase of 5.9 million over the past four quarters. Net postpaid subscriber additions in the second quarter totaled more than 1 million.

• Average monthly churn was 1.7 percent overall, down 50 basis points versus the year-earlier second quarter and down 20 basis points sequentially. This marked Cingular’s third consecutive quarter with a 20 basis-point sequential decline in overall churn. Postpaid churn improved to 1.5 percent, down 30 basis points versus the year-earlier quarter and down 10 basis points sequentially.

• Driven by subscriber gains and robust growth in data revenues, Cingular's total revenues grew to $9.2 billion, up 7.1 percent versus the year-earlier second quarter and up 2.7 percent from the first quarter this year. Cingular’s data revenues increased 51.2 percent year over year and 13.3 percent sequentially. Cingular’s data ARPU (average revenue per user) was $5.77 in the second quarter, up 38.7 percent versus the year-earlier second quarter and up 10.5 percent sequentially. Postpaid data ARPU was nearly $6.60.

• On a reported basis, Cingular’s second-quarter operating expenses were $8.2 billion, up 1.2 percent from the second quarter of 2005. Before merger-related costs of $499 million, operating expenses were $7.7 billion. Most of Cingular’s merger-related costs in the second quarter were noncash. The $499 million total included $336 million in noncash amortization of intangibles as part of the acquisition of AT&T Wireless, $77 million in noncash merger integration costs, and $86 million in cash integration costs.

• Cingular’s reported operating income for the second quarter of 2006 was $1.0 billion, up from $504 million in the year-earlier second quarter and $807 million in the first quarter of 2006. Operating income before merger-related costs was $1.5 billion, up from $1.2 billion in the year-ago second quarter and $1.4 billion in the first quarter of 2006.

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.

AT&T Inc. 2Q 2006 Earnings – Page 7

BellSouth Acquisition, Expanded Share Repurchase

On July 21, 2006, AT&T Inc. and BellSouth Corporation received approval from their stockholders for AT&T to acquire BellSouth. The acquisition is subject to approval by regulatory authorities and to other customary closing conditions. AT&T expects to receive the remaining approvals needed for the transaction to close by this fall.

AT&T announced in March that it expects to buy back $10 billion of its common shares by the end of 2007, and it expects approximately $2 billion to $3 billion of the repurchases to occur during 2006. This repurchase is intended to approximate the share premium paid to BellSouth stockholders as part of this transaction. The timing and nature of these repurchases will depend on market conditions and applicable securities laws.

Updated Financial Outlook

Based on first-half results and current trends, AT&T has updated portions of the 2006 financial outlook it provided in January.

• AT&T now expects its full-year adjusted consolidated operating income margin to be in the 17 percent to 18 percent range, up from its previous outlook of 15 percent to 16 percent.

• AT&T now expects to achieve full-year 2006 operating expense synergies from SBC/AT&T merger integration of $700 million to $900 million, up from its previous target range of $600 million to $700 million. Through the end of the second quarter, approximately $300 million of expense synergies had been realized.

• In January, pension and retiree costs were expected to dilute full-year earnings per share by $0.06 to $0.08. AT&T now expects pension and retiree costs to dilute 2006 earnings by $0.04 to $0.06.

• Project Lightspeed costs are now expected to reduce earnings per share in 2006 by $0.05 to $0.07, down from the $0.08 to $0.10 in January’s outlook, reflecting timing of scaled launch occurring later in the year.

• Driven by demand for data services, capital expenditures in 2006 are expected to be at the high end or slightly above the previously outlined $8 billion to $8.5 billion – in the low teens as a percentage of revenues. This total includes capital for merger integration projects and Project Lightspeed deployment.

AT&T Inc. 2Q 2006 Earnings – Page 8

• AT&T’s outlook for 2006 free cash flow after dividends is now expected to be in the mid-$2 billion range, up from its January outlook of approximately $2 billion, even with the majority of AT&T/SBC merger integration costs occurring this year. (Free cash flow after dividends is cash from operations plus AT&T’s proportionate share of Cingular free cash flow less capital expendi­tures and dividends.)

These updated expectations do not include any expected impacts from AT&T’s pending acquisition of BellSouth. As outlined in March when its plans to acquire BellSouth were announced, AT&T continues to expect double-digit adjusted EPS growth in each of the next three years, starting with 2006, along with significant growth in free cash flow after dividends. (After the BellSouth merger, free cash flow after dividends will be cash from operations less capital expenditures and dividends.)

This AT&T release and other news announcements are available as part of an RSS feed at www.att.com/rss.

About 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 57.3 million wireless customers. Additional information about AT&T Inc. and AT&T products and services is available at www.att.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 inAT&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.att.com/investor.relations.

Accompanying financial statements follow. Note that second-quarter 2005 results are reported and do not reflect any contribution from the former AT&T Corp. Previously released 2005 Pro Forma comparisons are available on AT&T's Investor Relations Web site at www.att.com/investor.relations.

EX-99

Financial Data

AT&T Inc.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited Three Months Ended Six Months Ended

	6/30/20	06	6/30/20	05	% C	hg	6/30/20	06	6/30/20	05	% C	hg
Operating Revenues
Voice	$  8,618		$  5,760		49	.6%	$17,340		$11,612		49	.3%
Data	4,477		2,438		83	.6%	8,919		4,829		84	.7%
Directory	909		901		0	.9%	1,810		1,806		0	.2%
Other	1,806		1,218		48	.3%	3,536		2,304		53	.5%
Total Operating Revenues	15,810		10,317		53	.2%	31,605		20,551		53	.8%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	6,928		4,401		57	.4%	14,056		8,789		59	.9%
Selling, general and administrative	3,792		2,589		46	.5%	7,776		5,054		53	.9%
Depreciation and amortization	2,486		1,809		37	.4%	4,978		3,634		37	.0%
Total Operating Expenses	13,206		8,799		50	.1%	26,810		17,477		53	.4%
Operating Income	2,604		1,518		71	.5%	4,795		3,074		56	.0%
Interest Expense	472		349		35	.2%	936		702		33	.3%
Interest Income	95		100		-5	.0%	180		209		-13	.9%
Equity in Net Income of Affiliates	455		181			-	789		123			-
Other Income (Expense) - Net	15		34		-55	.9%	26		81		-67	.9%
Income Before Income Taxes	2,697		1,484		81	.7%	4,854		2,785		74	.3%
Income Taxes	889		484		83	.7%	1,601		900		77	.9%
Net Income	$  1,808		$  1,000		80	.8%	$  3,253		$  1,885		72	.6%
Basic Earnings Per Share:
Net Income	$    0.47		$    0.30		56	.7%	$    0.84		$    0.57		47	.4%
Weighted Average Common
Shares Outstanding (000,000)	3,886		3,302		17	.7%	3,884		3,303		17	.6%
Diluted Earnings Per Share:
Net Income	$    0.46		$    0.30		53	.3%	$    0.83		$    0.57		45	.6%
Weighted Average Common
Shares Outstanding with Dilution (000,000)	3,905		3,312		17	.9%	3,903		3,314		17	.8%

Financial Data

AT&T Inc.

Statements of Segment Income

Dollars in millions

Unaudited

Three Months Ended Six Months Ended

Wireline	6/30/200	6	6/30/200	5	%	Chg	6/30/200	6	6/30/200	5	%	Chg
Segment Operating Revenues
Voice	$   8,618		$ 5,760		49	.6%	$ 17,340		$ 11,612		49	.3%
Data	4,477		2,438		83	.6%	8,919		4,829		84	.7%
Other	1,655		1,059		56	.3%	3,230		1,998		61	.7%
Total Segment Operating Revenues	14,750		9,257		59	.3%	29,489		18,439		59	.9%
Segment Operating Expenses
Cost of sales	6,655		4,139		60	.8%	13,511		8,262		63	.5%
Selling, general and administrative	3,534		2,314		52	.7%	7,235		4,484		61	.4%
Depreciation and amortization	2,427		1,757		38	.1%	4,857		3,530		37	.6%
Total Segment Operating Expenses	12,616		8,210		53	.7%	25,603		16,276		57	.3%
Segment Income	$   2,134		$ 1,047			-	$   3,886		$   2,163		79	.7%
Cingular *
Segment Operating Revenues
Service revenues	$   8,295		$ 7,719		7	.5%	$ 16,300		$ 15,138		7	.7%
Equipment sales	923		890		3	.7%	1,898		1,700		11	.6%
Total Segment Operating Revenues	9,218		8,609		7	.1%	18,198		16,838		8	.1%
Segment Operating Expenses
Cost of services and equipment sales	3,846		3,523		9	.2%	7,493		6,962		7	.6%
Selling, general and administrative	2,757		2,953		-6	.6%	5,603		5,954		-5	.9%
Depreciation and amortization	1,598		1,629		-1	.9%	3,278		3,304		-0	.8%
Total Segment Operating Expenses	8,201		8,105		1	.2%	16,374		16,220		0	.9%
Segment Operating Income	1,017		504			-	1,824		618			-
Other Income (Expense) - Net	(335	)	(333	)	-0	.6%	(664	)	(665	)	0	.2%
Segment Income (Loss)	$      682		$    171			-	$   1,160		$     (47	)		-
* Results reflect 100% of Cingular Wireless' actual results
Directory
Segment Operating Revenues	$      925		$    925			-	$   1,848		$   1,854		-0	.3%
Segment Operating Expenses
Cost of sales	288		276		4	.3%	576		556		3	.6%
Selling, general and administrative	147		156		-5	.8%	306		320		-4	.4%
Depreciation and amortization	-		1			-	1		3		-66	.7%
Total Segment Operating Expenses	435		433		0	.5%	883		879		0	.5%
Segment Operating Income	490		492		-0	.4%	965		975		-1	.0%
Equity in Net Income (Loss) of Affiliates	(6	)	-			-	(11	)	(1	)		-
Segment Income	$      484		$    492		-1	.6%	$      954		$      974		-2	.1%
Other **
Segment Operating Revenues	$      197		$    178		10	.7%	$      400		$      347		15	.3%
Segment Operating Expenses	218		198		10	.1%	457		410		11	.5%
Segment Operating Income (Loss)	(21	)	(20	)	-5	.0%	(57	)	(63	)	9	.5%
Equity in Net Income of Affiliates	461		182			-	800		124			-
Segment Income	$      440		$    162			-	$      743		$        61			-

** Equity in Net Income of Affiliates includes our 60% proportionate share of Cingular's results

Financial Data

AT&T Inc.

Consolidated Balance Sheets

Dollars in millions except per share amounts

6/30/06
Unaudited  12/31/05

Assets
Current Assets
Cash and cash equivalents	$     1,097		$     1,224
Accounts receivable - net of allowances for
uncollectibles of $1,039 and $1,176	8,484		9,351
Prepaid expenses	1,144		1,029
Deferred income taxes	1,876		2,011
Other current assets	1,034		1,039
Total current assets	13,635		14,654
Property, plant and equipment - at cost	151,716		149,238
Less: accumulated depreciation and amortization	93,365		90,511
Property, Plant and Equipment - Net	58,351		58,727
Goodwill	13,433		14,055
Intangible Assets - Net	7,978		8,503
Investments in Equity Affiliates	2,147		2,031
Investments in and Advances to Cingular Wireless	32,656		31,404
Other Assets	16,150		16,258
Total Assets	$ 144,350		$ 145,632
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$     3,314		$     4,455
Accounts payable and accrued liabilities	15,472		17,088
Accrued taxes	2,955		2,586
Dividends payable	1,291		1,289
Total current liabilities	23,032		25,418
Long-Term Debt	27,159		26,115
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes	14,886		15,713
Postemployment benefit obligation	18,461		18,133
Unamortized investment tax credits	195		209
Other noncurrent liabilities	5,148		5,354
Total deferred credits and other noncurrent liabilities	38,690		39,409
Stockholders' Equity
Common shares issued ($1 par value)	4,065		4,065
Capital in excess of par value	27,217		27,499
Retained earnings	29,771		29,106
Treasury shares (at cost)	(5,002	)	(5,406	)
Additional minimum pension liability adjustment	(218	)	(218	)
Accumulated other comprehensive income	(364	)	(356	)
Total stockholders' equity	55,469		54,690
Total Liabilities and Stockholders' Equity	$ 144,350		$ 145,632

Financial Data

AT&T Inc.

Consolidated Statements of Cash Flows

Dollars in millions, increase (decrease) in cash and cash equivalents

Unaudited          Six Months Ended

	6/30/06		6/30/05
Operating Activities
Net income	$ 3,253		$ 1,885
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization	4,978		3,634
Undistributed earnings from investments in equity affiliates	(752	)	(87	)
Provision for uncollectible accounts	320		413
Amortization of investment tax credits	(14	)	(11	)
Deferred income tax (benefit) expense	65		(264	)
Net gain on sales of investments	(10	)	(75	)
Changes in operating assets and liabilities:
Accounts receivable	545		217
Other current assets	(84	)	(14	)
Accounts payable and accrued liabilities	(1,431	)	(1,123	)
Stock-based compensation tax benefit	(5	)	(3	)
Other - net	288		465
Total adjustments	3,900		3,152
Net Cash Provided by Operating Activities	7,153		5,037
Investing Activities
Construction and capital expenditures	(4,042	)	(2,329	)
Receipts from (investments in) affiliates - net	(717	)	1,179
Maturities of held-to-maturity securities	3		98
Dispositions	55		86
Acquisitions	(115	)	(169	)
Proceeds from note repayment	-		37
Other	4		-
Net Cash Used in Investing Activities	(4,812	)	(1,098	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less	1,020		(882	)
Repayment of other short-term borrowings	(3	)	-
Issuance of long-term debt	1,491		-
Repayment of long-term debt	(2,540	)	(1,037	)
Purchase of treasury shares	(148	)	(235	)
Issuance of treasury shares	236		298
Dividends paid	(2,581	)	(2,130	)
Stock-based compensation tax benefit	5		3
Other	52		-
Net Cash Used in Financing Activities	(2,468	)	(3,983	)
Net increase (decrease) in cash and cash equivalents
from continuing operations	(127	)	(44	)
Net Cash Used in Operating Activities from Discontinued Operations	-		(310	)
Net increase (decrease) in cash and cash equivalents	(127	)	(354	)
Cash and cash equivalents beginning of year	1,224		760
Cash and Cash Equivalents End of Period	$ 1,097		$    406

Financial Data

AT&T Inc.

Supplementary Operating Data

Dollars in millions

Unaudited Three Months Ended Six Months Ended

	6/30/2006	6/30/2005	6/30/20	06	6/30/20	05
In-Region 1
Total Consumer Retail Connections (000)
Retail Consumer Access Lines			25,990		27,144
Consumer DSL Lines			6,570		4,908
Video Subscribers 2			533		404
Total Consumer Retail Connections (000)			33,093		32,456
Switched Access Lines (000)
Retail Consumer - Primary			22,310		23,036
Retail Consumer - Additional			3,680		4,108
Retail Business			17,282		17,513
Retail			43,272		44,657
Wholesale 3			4,358		5,977
Coin 4			281		398
Total Switched Access Lines (000)			47,911		51,032
Unbundled Loops (000)			1,640		1,526
DSL Lines in Service (000)			7,774		5,968
Net DSL Line Additions (000)	342	360	853		864
Video Subscribers (000) 2			533		404
Net Video Subscriber Additions (000) 2	42	10	76		81
Cingular Wireless 5, 6
Wireless Voice Customers (000)			57,308		51,442
Net Customer Additions (000)	1,498	952	3,177		2,319
M&A Activity, Partitioned Customers and Other Adjs.	-	140	(13	)	(9	)
POPs (000,000)			296		294

¹  In-region represents access lines served by AT&T's incumbent local exchange companies.

²  Video Subscribers include sales under agency agreement with EchoStar.

³  Wholesale lines at 6-30-06 include approximately 1.39 million lines purchased by AT&T Corp.

⁴  Coin includes both retail and wholesale access lines.

⁵  Amounts represent 100% of the results from Cingular Wireless.

⁶  Prior year amounts restated to conform to current period reporting methodology.

Non-GAAP Financial Data

AT&T Inc.

Supplemental Consolidated Income Statements

Dollars in millions

Unaudited

Three Months Ended     Six Months Ended

	6/30/06		6/30/05		% C	hg	6/30/06		6/30/05		% C	hg
Total Operating Revenues	$ 24,663		$ 18,721		31	.7%	$ 49,056		$ 37,002		32	.6%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	10,409		7,719		34	.8%	20,802		15,364		35	.4%
Selling, general and administrative	6,549		5,542		18	.2%	13,379		11,008		21	.5%
Depreciation and amortization	4,084		3,438		18	.8%	8,256		6,938		19	.0%
Total Operating Expenses	21,042		16,699		26	.0%	42,437		33,310		27	.4%
Operating Income	3,621		2,022		79	.1%	6,619		3,692		79	.3%
Interest Expense	695		586		18	.6%	1,389		1,186		17	.1%
Interest Income	23		29		-20	.7%	45		65		-30	.8%
Minority Interest	(358	)	(111	)		-	(550	)	(40	)		-
Equity in Net Income of Affiliates	131		94		39	.4%	253		182		39	.0%
Other Income (Expense) - Net	19		50		-62	.0%	36		99		-63	.6%
Income Before Income Taxes	2,741		1,498		83	.0%	5,014		2,812		78	.3%
Income Taxes	933		498		87	.3%	1,761		927		90	.0%
Net Income	$   1,808		$   1,000		80	.8%	$   3,253		$   1,885		72	.6%

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 6/30/06
Dollars in millions

Unaudited Reported Non-GAAP

	AT&T		Cingular		Consolidat Adjustme	ing nts	Supplem Consolid	ental ated
Total Operating Revenues	$ 15,810		$ 9,218		$(365	)	$ 24,663
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	6,928		3,846		(365	)	10,409
Selling, general and administrative	3,792		2,757		-		6,549
Depreciation and amortization	2,486		1,598		-		4,084
Total Operating Expenses	13,206		8,201		(365	)	21,042
Operating Income	2,604		1,017		-		3,621
Interest Expense	472		298		(75	)	695
Interest Income	95		3		(75	)	23
Minority Interest	(1	)	(43	)	(314	)	(358	)
Equity in Net Income of Affiliates	455		-		(324	)	131
Other Income (Expense) - Net	16		3		-		19
Income Before Income Taxes	2,697		682		(638	)	2,741
Income Taxes	889		142		(98	)	933
Net Income	$   1,808		$    540		$(540	)	$   1,808

For the Three Months Ended 6/30/05
Dollars in millions

Unaudited Reported Non-GAAP

	AT&T		Cingular		Consolidat Adjustme	ing nts	Supplem Consolid	ental ated
Total Operating Revenues	$ 10,317		$ 8,609		$(205	)	$ 18,721
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	4,401		3,523		(205	)	7,719
Selling, general and administrative	2,589		2,953		-		5,542
Depreciation and amortization	1,809		1,629		-		3,438
Total Operating Expenses	8,799		8,105		(205	)	16,699
Operating Income	1,518		504		-		2,022
Interest Expense	349		326		(89	)	586
Interest Income	100		18		(89	)	29
Minority Interest	(1	)	(41	)	(69	)	(111	)
Equity in Net Income of Affiliates	181		1		(88	)	94
Other Income (Expense) - Net	35		15		-		50
Income Before Income Taxes	1,484		171		(157	)	1,498
Income Taxes	484		24		(10	)	498
Net Income	$   1,000		$    147		$(147	)	$   1,000

Non-GAAP Financial Data Reconciliation

AT&T Inc.

Supplemental Consolidated Income Statements

For the Six Months Ended 6/30/06
Dollars in millions

Unaudited Reported Non-GAAP

	AT&T		Cingular		Consolidat Adjustme	ing nts	Supplem Consolid	ental ated
Total Operating Revenues	$ 31,605		$ 18,198		$  (747	)	$ 49,056
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	14,056		7,493		(747	)	20,802
Selling, general and administrative	7,776		5,603		-		13,379
Depreciation and amortization	4,978		3,278		-		8,256
Total Operating Expenses	26,810		16,374		(747	)	42,437
Operating Income	4,795		1,824		-		6,619
Interest Expense	936		595		(142	)	1,389
Interest Income	180		7		(142	)	45
Minority Interest	(2	)	(84	)	(464	)	(550	)
Equity in Net Income of Affiliates	789		-		(536	)	253
Other Income (Expense) - Net	28		8		-		36
Income Before Income Taxes	4,854		1,160		(1,000	)	5,014
Income Taxes	1,601		266		(106	)	1,761
Net Income	$   3,253		$      894		$  (894	)	$   3,253

For the Six Months Ended 6/30/05
Dollars in millions

Unaudited Reported Non-GAAP

	AT&T		Cingular		Consolidat Adjustme	ing nts	Supplem Consolid	ental ated
Total Operating Revenues	$ 20,551		$ 16,838		$(387	)	$ 37,002
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	8,789		6,962		(387	)	15,364
Selling, general and administrative	5,054		5,954		-		11,008
Depreciation and amortization	3,634		3,304		-		6,938
Total Operating Expenses	17,477		16,220		(387	)	33,310
Operating Income	3,074		618		-		3,692
Interest Expense	702		664		(180	)	1,186
Interest Income	209		36		(180	)	65
Minority Interest	(1	)	(57	)	18		(40	)
Equity in Net Income of Affiliates	123		3		56		182
Other Income (Expense) - Net	82		17		-		99
Income (Loss) Before Income Taxes	2,785		(47	)	74		2,812
Income Taxes	900		46		(19	)	927
Net Income (Loss)	$   1,885		$     (93	)	$   93		$   1,885