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 23, 2008

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.)

208 S. Akard St., Dallas, Texas	75202
(Address of Principal Executive Offices)	(Zip Code)

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

175 E. Houston St., San Antonio, Texas	78205
(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):

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

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

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

o   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 23, 2008, its results of operations for the second quarter of 2008. 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 23, 2008 reporting financial results for the second quarter ended June 30, 2008.

99.2	AT&T Inc. selected financial statements and operating data.
99.3	Discussion of OIBDA,  Free Cash Flow, Free Cash Flow Yield, and Free Cash Flow after Dividends

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 22, 2008	By: /s/ John J. Stephens        John J. Stephens Senior Vice President and Controller

EX-99.1

      

For more information, contact:

Jamie Anderson

Office: 210-352-6973

Mobile: 210-219-1580

janderso@attnews.us

AT&T Delivers Solid Second-Quarter Results

Highlighted by Strong Wireless Growth,

Double-Digit Increase in IP Data Revenues,

Further Ramp in AT&T U-verse TV Subscribers

§   $0.63 reported earnings per diluted share, up 34.0 percent versus $0.47 in the year-earlier second quarter

§   $0.76 adjusted earnings per diluted share, up 8.6 percent from $0.70 in the second quarter of 2007

§   Consolidated operating income margin expansion to 21.3 percent reported from 16.8 percent in the year-earlier quarter and 25.1 percent adjusted versus 23.9 percent

§   15.8 percent increase in wireless revenues with wireless data revenues from areas such as Internet access, messaging and e-mail up a robust 52.0 percent

§   More than 1.3 million net gain in wireless subscribers to reach 72.9 million in service; postpaid subscriber churn down to 1.1 percent, lowest level in company’s history

§   16.1 percent growth in wireline IP data revenues driven by strong increases in consumer video and broadband revenues and in business services such as virtual private networks (VPNs), managed Internet services and hosting

§   Significant turnaround in wholesale customer revenues, second consecutive quarter of sequential growth reflecting solid demand from wireless carriers, Internet service providers and other customers

§   Further ramp in AT&T U-verseSM TV subscribers, with a net subscriber gain of 170,000 to reach 549,000 in service; on trajectory  to exceed 1 million subscribers in service by the end of this year

Note: AT&T's second-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. ET on Wednesday, July 23, 2008, at www.att.com/investor.relations.

DALLAS, JULY 23, 2008 – AT&T Inc. (NYSE:T) today reported solid second-quarter results highlighted by strong wireless growth, double-digit gains in revenues from IP-based data services and further expansion of consolidated margins.

"Our results demonstrate the great strength of AT&T’s assets and our ability to execute with focus and discipline,” said Randall Stephenson, AT&T chairman and chief executive officer. “Earnings growth continues to be solid, our wireless momentum is strong, our major growth and cost-reduction initiatives are on track, and we continue to return substantial value to shareowners.

"As we generate sound financial results, AT&T also has taken the lead to innovate and create great solutions for customers,” Stephenson said. “Mobility, broadband connectivity and integrated services that encompass voice, data and video are driving a new world of communications. AT&T is all about deploying and enhancing premier networks and products to deliver this world to both business and consumers.

"The Apple iPhone 3G is a dramatic example of this transformation," Stephenson added. "In the days following our exclusive U.S. launch of this new device, powered by the nation’s fastest 3G wireless network, customer response has been everything we had anticipated and more. This strengthens our wireless business, and it reinforces our positive view of the opportunities ahead for AT&T and the industry.”

Reported Results

For the quarter ended June 30, 2008, AT&T's consolidated revenues totaled $30.9 billion, up 4.7 percent versus reported results in the year-earlier quarter and up 3.6 percent compared with second-quarter 2007 pro forma revenues, which exclude merger-related accounting impacts on directory revenues.

Compared with results for the year-earlier quarter, AT&T's reported operating expenses for the second quarter of 2008 were $24.3 billion, down from $24.5 billion; reported operating income was $6.6 billion, up from $4.9 billion; and AT&T's reported operating income margin was 21.3 percent, up from 16.8 percent.

AT&T's reported second-quarter 2008 net income totaled $3.8 billion, up from $2.9 billion in the year-earlier quarter, and reported earnings per diluted share totaled $0.63, up from $0.47 in the second quarter of 2007.

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Adjusted Results

AT&T's adjusted results for the second quarter of 2008 exclude noncash merger-related amortization expenses. For the second quarter of 2007, adjusted results excluded merger integration costs, merger-related amortization expenses and a merger-related directory accounting effect.

Compared with results for the year-earlier quarter, AT&T's adjusted operating expenses for the second quarter of 2008 totaled $23.1 billion, versus $22.7 billion; adjusted operating income was $7.7 billion, up from $7.1 billion; and AT&T's adjusted operating income margin was 25.1 percent, up from 23.9 percent. This margin expansion reflects revenue growth along with benefits from merger synergies and other productivity initiatives.

AT&T's adjusted second-quarter 2008 net income totaled $4.5 billion, up from $4.3 billion in the year-earlier quarter, and adjusted earnings per diluted share totaled $0.76, up from $0.70 in the second quarter of 2007.

Cash From Operations, Share Repurchases

AT&T's cash from operating activities for the second quarter of 2008 totaled $8.5 billion, capital expenditures totaled $5.3 billion, and free cash flow (cash from operations minus capital expenditures) totaled $3.2 billion. Year to date through the first half of 2008, cash from operating activities totaled $13.5 billion, capital expenditures totaled $9.6 billion, and free cash flow totaled $3.9 billion.

As it invests in the future of its business, AT&T continues to return substantial value to shareowners through dividends and share repurchases. Dividends paid totaled $2.4 billion in the second quarter and $4.8 billion year to date. Shares repurchased totaled 52.6 million for $2.0 billion in the second quarter and 164.2 million for $6.1 billion through the first half of the year. AT&T ended the second quarter with 5.9 billion shares outstanding.

Wireless Operational Highlights

AT&T delivered strong wireless growth in the second quarter with solid subscriber gains, continued rapid growth in wireless data revenues and improved margins. Highlights include the following:

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15.8 percent Wireless Revenue Growth. Total wireless revenues increased 15.8 percent to $12.0 billion in the second quarter, and wireless service revenues, which exclude handset and accessory sales, grew 14.8 percent to $11.0 billion.  Wireless revenue growth was driven by solid subscriber gains and a greater number of customers choosing more advanced smartphones and integrated devices, spurring increased usage of data services. Retail postpaid subscriber ARPU (average monthly revenues per subscriber) was up 3.5 percent versus the year-earlier second quarter.

Wireless Data Services Up 52.0 percent. Wireless data revenues grew 52.0 percent versus the year-earlier quarter to $2.5 billion, reflecting continued strong adoption of services such as Internet and data access, e-mail and messaging. Wireless Internet access revenues more than doubled versus results for the year-earlier second quarter, while revenues from e-mail, messaging and data access all delivered greater than 50 percent growth. Text messaging volumes tripled versus totals for the year-earlier quarter, and multimedia message volumes increased more than 170 percent. At the end of the second quarter, approximately 18 percent of AT&T’s postpaid wireless subscribers had an integrated device, up from 8 percent one year earlier. On average, these subscribers have ARPUs roughly double the company average. AT&T expects continued strong growth in wireless data services as more customers choose data plans and advanced wireless devices such as the new iPhone 3G, which was launched as an AT&T U.S. exclusive on July 11. In the first 12 days following launch, sales of the iPhone 3G were nearly double levels achieved in AT&T’s 2007 iPhone launch.

Solid Wireless Subscriber Growth with Reduced Postpaid Churn. AT&T's second-quarter net gain in total wireless subscribers exceeded 1.3 million, down 123,000 versus results in the second quarter of 2007 and up 38,000 compared with the first quarter of this year. Retail postpaid net adds totaled 894,000, down 2.0 percent versus the year-earlier second quarter and up 26.8 percent from results in the first quarter of this year. This sequential postpaid improvement was achieved despite reduced iPhone sales ahead of the early July iPhone 3G launch. Retail postpaid churn moved down to 1.1 percent in the second quarter, the lowest level in the company’s history.

Wireless Operating Income Growth. On a reported basis, AT&T's second-quarter wireless operating expenses totaled $9.0 billion, and operating income was $3.1 billion, up 91.0 percent from $1.6 billion in the second quarter of 2007. Adjusting for merger integration costs, wireless operating expenses totaled $8.4 billion, and operating income was $3.6 billion, up 38.9 percent from $2.6 billion in the second quarter of 2007.

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Continued Strength in Wireless Margins. Strong revenue growth, network efficiencies and operational improvements continue to drive strong wireless margins. AT&T's reported wireless operating income margin in the second quarter was 25.5 percent, up from 15.4 percent in the year-earlier quarter, and its adjusted wireless operating income margin was 29.9 percent, up from 24.9 percent in the year-earlier quarter. AT&T's second-quarter wireless OIBDA service margin was 41.2 percent, up from an unadjusted 35.8 percent and an adjusted 37.5 percent in the year-earlier quarter. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

Wireline Operational Highlights

AT&T's second-quarter wireline results were highlighted by continued strong double-digit growth in business and consumer IP-based data revenues, a substantial turnaround in wholesale revenues and a further ramp in AT&T U-verse TV subscribers:

Major Turnaround in Wholesale. In the second quarter, AT&T further advanced the significant improvement in wholesale revenue trends it has achieved over the past year. Total wholesale revenues were $3.5 billion, down just 0.2 percent versus the year-earlier quarter. This represents a major step up from a year-over-year decline of 8.3 percent in the second quarter of 2007 and marks the company’s second consecutive quarter of sequential revenue growth in this category. This reflects solid demand from wireless carriers, Internet service providers, content providers and other customers, offsetting expected declines in local voice. AT&T and IBM last fall announced an agreement that calls for AT&T to become the primary global network management services provider to IBM. As a result, AT&T expects to receive up to $5 billion of additional revenues over the five-year term of the agreement, initially in the wholesale customer category. These revenues are expected to ramp further in the second half of 2008 and in 2009.

Continued Strength in Enterprise. Over the past two years, AT&T has delivered a major turnaround in enterprise growth rates, and in the second quarter results were highlighted by an 18.4 percent increase in enterprise IP data revenues, including areas such as VPNs, managed Internet services and hosting. Total enterprise revenues in the second quarter were $4.7 billion, down 1.0 percent versus results for the year-earlier quarter, and enterprise service revenues, which exclude CPE sales, were down 0.1 percent. Enterprise fundamentals in terms of closed sales, a strong sales funnel and new service adoption remain solid. AT&T expects to deliver positive growth in total enterprise revenues for the full year 2008.

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Regional Business Growth. AT&T's total regional business revenues increased 1.6 percent in the second quarter to $3.2 billion. Regional business data revenues grew 5.2 percent, led by robust growth in Ethernet services and 13.7 percent growth in IP data services, including double-digit gains in managed Internet, VPN and hosting services.

Further Ramp in AT&T U-verse TV Services. AT&T U-verse TV, the company's next-generation IP-based video service, continued its strong ramp during the second quarter, with a net subscriber gain of 170,000 to reach 549,000 in service. U-verse network deployment is on schedule, install times continue to decline and the attach rates for broadband service continue to be high. The company is on a trajectory to reach its target of more than 1 million AT&T U-verse TV subscribers by year-end 2008.

Growth in Consumer ARPU, with Strong Double-Digit Growth in Regional Consumer IP Data Revenues. Second-quarter regional consumer results reflect continued strong growth in revenues from broadband and AT&T U-verse services in large part offsetting traditional voice access line pressures. Regional consumer IP revenues, which combine revenues from broadband and AT&T U-verse services, grew 19.3 percent versus the year-earlier quarter, and revenues per consumer household served increased 4.2 percent. Total regional consumer revenues were $5.6 billion, down 2.1 percent versus the year-earlier quarter and down 0.7 percent sequentially.  In addition to operational trends, these comparisons also reflect a change in AT&T’s relationship with Yahoo!® Inc., which provides portal services to AT&T’s more than 14 million wireline broadband subscribers. Under the new arrangement, AT&T no longer pays monthly portal fees and receives a reduced level of shared advertising revenues from Yahoo!  Regional consumer revenue connections (retail voice, high speed Internet and video) totaled 48.4 million at the end of the quarter, versus 49.5 million at the end of the second quarter of 2007 and 49.3 million at the end of the first quarter of 2008. Total consumer broadband and TV connections over the past year increased by 2.2 million.

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At the end of the second quarter, AT&T had 14.7 million total broadband connections, up 1.4 million over the past year and up 46,000 in the second quarter of 2008.

Wireline Expense Reduction. AT&T’s reported second-quarter wireline operating expenses totaled $14.5 billion, down 2.1 percent from results in the year-earlier quarter, and on an adjusted basis, wireline operating expenses were $14.1 billion, down 0.1 percent versus results for the second quarter of 2007.

Additional Background on Adjusted and Pro Forma Results

AT&T's adjusted earnings for the second quarter of 2008 exclude noncash, pretax amortization costs related to acquisitions totaling $1.2 billion, or $0.13 per diluted share. Adjusted results for the second quarter of 2007 excluded: (1) pretax cash merger-related integration costs totaling $324 million, or $0.03 per diluted share; (2) noncash, pretax merger-related costs totaling $1.7 billion, or $0.18 per diluted share; and (3) a merger-related directory accounting impact of $187 million, or $0.02 per diluted share.

Advertising & Publishing results for 2007 were affected by accounting adjustments following AT&T's late 2006 acquisition of BellSouth. In accordance with purchase accounting rules, deferred revenues and expenses for all BellSouth directories delivered prior to the close of the merger were eliminated from 2007 consolidated results. This elimination of amortizations reduced second-quarter 2007 consolidated revenues by $306 million and consolidated operating expenses by $119 million.

AT&T manages its print directory business using amortized results. As a result, 2007 amortized results are shown in the Advertising & Publishing segment on AT&T's Statement of Segment Income. In 2008, both consolidated and segment results reflect amortization accounting.

About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company. Its subsidiaries and affiliates, AT&T operating companies, are the providers of AT&T services in the United States and around the world. Among their offerings are the world's most advanced IP-based business communications services and the nation's leading wireless, high speed Internet access and voice services. In domestic markets, AT&T is known for the directory publishing and advertising sales leadership of its Yellow Pages and YELLOWPAGES.COM organizations, and the AT&T brand is licensed to innovators in such fields as communications equipment. As part of its three-screen integration strategy, AT&T is expanding its TV entertainment offerings. Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at www.att.com.

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© 2008 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

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

Find More Information Online:

Web Site Links:	Related Media Kits:
AT&T Web Site AT&T Investor Relations	2007 Annual Report
Related Releases:	Related Fact Sheets:
AT&T to Release Second-Quarter 2008 Earnings July 23

Technorati Tags: AT&T, Second-Quarter Earnings, Webcast

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 in AT&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: OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from Segment Operating Income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.

NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views it as a measure of cash available to pay debt and return cash to shareowners.

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EX-99.2

Financial Data
AT&T Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts
Unaudited	Three Months Ended								Six Months Ended
	6/30/2008			6/30/2007		% Ch		g	6/30/2008			6/30/2007		% Ch		g
Operating Revenues
Wireless service	$	10,894		$	9,513		14.5	%	$	21,499		$	18,583		15.7	%
Voice		9,519			10,378		-8.3	%		19,212			20,833		-7.8	%
Data		6,054			5,746		5.4	%		12,026			11,401		5.5	%
Directory		1,383			1,155		19.7	%		2,781			2,177		27.7	%
Other		3,016			2,686		12.3	%		6,092			5,453		11.7	%
Total Operating Revenues		30,866			29,478		4.7	%		61,610			58,447		5.4	%
Operating Expenses
Cost of services and sales (exclusive of
depreciation and amortization shown separately below)		11,900			11,658		2.1	%		23,902			23,080		3.6	%
Selling, general and administrative		7,441			7,460		-0.3	%		15,300			14,727		3.9	%
Depreciation and amortization		4,958			5,416		-8.5	%		9,861			11,032		-10.6	%
Total Operating Expenses		24,299			24,534		-1.0	%		49,063			48,839		0.5	%
Operating Income		6,567			4,944		32.8	%		12,547			9,608		30.6	%
Interest Expense		854			879		-2.8	%		1,719			1,752		-1.9	%
Equity in Net Income of Affiliates		212			210		1.0	%		455			383		18.8	%
Other Income (Expense) - Net		(43	)		127		-			(10	)		631		-
Income Before Income Taxes		5,882			4,402		33.6	%		11,273			8,870		27.1	%
Income Taxes		2,110			1,498		40.9	%		4,040			3,118		29.6	%
Net Income	$	3,772		$	2,904		29.9	%	$	7,233		$	5,752		25.7	%
Basic Earnings Per Share	$	0.64		$	0.47		36.2	%	$	1.21		$	0.93		30.1	%
Weighted Average Common
Shares Outstanding (000,000)		5,926			6,145		-3.6	%		5,962			6,184		-3.6	%
Diluted Earnings Per Share	$	0.63		$	0.47		34.0	%	$	1.21		$	0.92		31.5	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		5,962			6,195		-3.8	%		5,997			6,230		-3.7	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Six Months Ended
Wireless	6/30/2008			6/30/2007			% Ch		g	6/30/2008			6/30/2007			% Ch		g
Segment Operating Revenues
Service	$	10,951		$	9,540			14.8	%	$	21,596		$	18,632			15.9	%
Equipment		1,082			855			26.5	%		2,262			1,760			28.5	%
Total Segment Operating Revenues		12,033			10,395			15.8	%		23,858			20,392			17.0	%
Segment Operating Expenses
Cost of services and equipment sales		4,162			3,941			5.6	%		8,272			7,611			8.7	%
Selling, general and administrative		3,361			3,040			10.6	%		6,640			5,953			11.5	%
Depreciation and amortization		1,446			1,810			-20.1	%		2,926			3,701			-20.9	%
Total Segment Operating Expenses		8,969			8,791			2.0	%		17,838			17,265			3.3	%
Segment Operating Income		3,064			1,604			91.0	%		6,020			3,127			92.5	%
Equity in Net Income of Affiliates		3			17			-82.4	%		5			24			-79.2	%
Minority Interest		(69	)		(67	)		-3.0	%		(129	)		(115	)		-12.2	%
Segment Income	$	2,998		$	1,554			92.9	%	$	5,896		$	3,036			94.2	%
Wireline
Segment Operating Revenues
Voice	$	9,757		$	10,586			-7.8	%	$	19,676		$	21,263			-7.5	%
Data		6,287			5,980			5.1	%		12,492			11,842			5.5	%
Other		1,564			1,427			9.6	%		3,064			2,880			6.4	%
Total Segment Operating Revenues		17,608			17,993			-2.1	%		35,232			35,985			-2.1	%
Segment Operating Expenses
Cost of sales		7,818			7,817			-			15,780			15,618			1.0	%
Selling, general and administrative		3,409			3,685			-7.5	%		6,951			7,486			-7.1	%
Depreciation and amortization		3,269			3,301			-1.0	%		6,439			6,742			-4.5	%
Total Segment Operating Expenses		14,496			14,803			-2.1	%		29,170			29,846			-2.3	%
Segment Income	$	3,112		$	3,190			-2.4	%	$	6,062		$	6,139			-1.3	%
Advertising & Publishing
Segment Operating Revenues	$	1,407		$	1,478			-4.8	%	$	2,824		$	2,921			-3.3	%
Segment Operating Expenses
Cost of sales		439			364			20.6	%		860			797			7.9	%
Selling, general and administrative		332			428			-22.4	%		698			729			-4.3	%
Depreciation and amortization		203			263			-22.8	%		415			505			-17.8	%
Total Segment Operating Expenses		974			1,055			-7.7	%		1,973			2,031			-2.9	%
Segment Income	$	433		$	423			2.4	%	$	851		$	890			-4.4	%
Other
Segment Operating Revenues	$	512		$	558			-8.2	%	$	1,056		$	1,096			-3.6	%
Segment Operating Expenses		554			643			-13.8	%		1,442			1,155			24.8	%
Segment Operating Loss		(42	)		(85	)		50.6	%		(386	)		(59	)		-
Equity in Net Income of Affiliates		209			202			3.5	%		450			374			20.3	%
Segment Income	$	167		$	117			42.7	%	$	64		$	315			-79.7	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	6/30/08			12/31/07
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	1,631		$	1,970
Accounts receivable - net of allowances for
uncollectibles of $1,303 and $1,364		15,971			16,185
Prepaid expenses		1,671			1,524
Deferred income taxes		1,407			2,044
Other current assets		2,545			2,963
Total current assets		23,225			24,686
Property, Plant and Equipment - Net		97,368			95,890
Goodwill		71,528			70,713
Licenses		46,771			37,985
Customer Lists and Relationships - Net		12,568			14,505
Other Intangible Assets - Net		5,844			5,912
Investments in Equity Affiliates		2,838			2,270
Postemployment Benefit		17,898			17,291
Other Assets		6,468			6,392
Total Assets	$	284,508		$	275,644
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	16,472		$	6,860
Accounts payable and accrued liabilities		18,927			21,399
Advanced billing and customer deposits		3,573			3,571
Accrued taxes		3,782			5,027
Dividends payable		2,357			2,417
Total current liabilities		45,111			39,274
Long-Term Debt		63,675			57,255
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		25,136			24,939
Postemployment benefit obligation		24,832			24,011
Other noncurrent liabilities		13,817			14,798
Total deferred credits and other noncurrent liabilities		63,785			63,748
Stockholders' Equity
Common shares issued ($1 par value)		6,495			6,495
Capital in excess of par value		91,647			91,638
Retained earnings		35,719			33,297
Treasury shares (at cost)		(21,420	)		(15,683	)
Accumulated other comprehensive loss		(504	)		(380	)
Total stockholders' equity		111,937			115,367
Total Liabilities and Stockholders' Equity	$	284,508		$	275,644

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
Unaudited	Six Months Ended
	6/30/08			6/30/07
Operating Activities
Net income	$	7,233		$	5,752
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		9,861			11,032
Undistributed earnings from investments in equity affiliates		(415	)		(344	)
Provision for uncollectible accounts		860			738
Deferred income tax expense (benefit)		1,384			(546	)
Net gain on sales of investments		(27	)		(64	)
Gain on license exchange		-			(409	)
Changes in operating assets and liabilities:
Accounts receivable		(776	)		87
Other current assets		274			(665	)
Accounts payable and accrued liabilities		(5,117	)		(287	)
Stock-based compensation tax benefit		(14	)		(107	)
Other - net		242			(108	)
Total adjustments		6,272			9,327
Net Cash Provided by Operating Activities		13,505			15,079
Investing Activities
Construction and capital expenditures
Capital expenditures		(9,320	)		(7,460	)
Interest during construction		(257	)		(78	)
Acquisitions, net of cash acquired		(10,087	)		(221	)
Dispositions		623			520
Proceeds from sale of securities, net of investments		(73	)		509
Other		41			17
Net Cash Used in Investing Activities		(19,073	)		(6,713	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		6,590			(1,993	)
Issuance of long-term debt		10,924			5,924
Repayment of long-term debt		(1,605	)		(2,065	)
Purchase of treasury shares		(6,077	)		(6,904	)
Issuance of treasury shares		310			1,252
Dividends paid		(4,802	)		(4,414	)
Stock-based compensation tax benefit		14			107
Other		(125	)		(121	)
Net Cash Provided by (Used in) Financing Activities		5,229			(8,214	)
Net increase (decrease) in cash and cash equivalents		(339	)		152
Cash and cash equivalents beginning of year		1,970			2,418
Cash and Cash Equivalents End of Period	$	1,631		$	2,570

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts
Unaudited	Three Months Ended									Six Months Ended
	6/30/2008			6/30/2007			% Ch		g	6/30/2008			6/30/2007			% Ch		g
Wireless
Wireless Customers (000)											72,882			63,673			14.5	%
Net Customer Additions (000)		1,333			1,456			-8.4	%		2,628			2,647			-0.7	%
M&A Activity, Partitioned Customers and Other Adjs. (000)		182			-			-			202			64			-
Postpaid Customers (000)											57,043			51,488			10.8	%
Net Postpaid Customer Additions (000)		894			912			-2.0	%		1,599			1,592			0.4	%
Postpaid Churn		1.1	%		1.2	%	-10 B		P		1.2	%		1.3	%	-10 B		P
Licensed POPs (000,000)											304			299			1.7	%
In-Region Wireline 1
Total Consumer Revenue Connections (000) 8
Retail Consumer Primary Switched/VoIP connections 2											29,349			32,124			-8.6	%
Retail Consumer Additional Switched/VoIP connections 2											3,703			4,232			-12.5	%
Consumer Broadband Connections 3											12,581			11,260			11.7	%
Video Connections: 4
Satellite Connections											2,235			1,846			21.1	%
U-verse Video Connections											549			51			-
Total Consumer Revenue Connections (000)											48,417			49,513			-2.2	%
Net Consumer Revenue Connection Changes (000)		(923	)		248			-			(1,021	)		652			-
Switched Access Lines (000) 8
Retail Consumer - Primary											29,319			32,124			-8.7	%
Retail Consumer - Additional											3,701			4,232			-12.5	%
Retail Business											22,428			23,144			-3.1	%
Retail											55,448			59,500			-6.8	%
Wholesale 5											3,248			4,283			-24.2	%
Coin 6											164			295			-44.4	%
Total Switched Access Lines (000)											58,860			64,078			-8.1	%
Net Switched Access Line Changes (000)		(1,555	)		(1,351	)		-15.1	%		(2,722	)		(2,391	)		-13.8	%
Total Broadband Connections (000) 3, 8											14,693			13,261			10.8	%
Net Broadband Connection Changes (000) 3, 8		46			400			-88.5	%		537			1,091			-50.8	%
Total Video Connections (000) 4											2,784			1,897			46.8	%
Net Video Connection Changes (000) 4		173			200			-13.5	%		437			387			12.9	%
AT&T Inc.
Construction and capital expenditures
Captial expenditures	$	5,142		$	4,122			24.7	%	$	9,320		$	7,460			24.9	%
Interest during construction	$	187		$	43			-		$	257		$	78			-
Dividends Declared per Share	$	0.4000		$	0.3550			12.7	%	$	0.8000		$	0.7100			12.7	%
End of Period Common Shares Outstanding (000,000)											5,892			6,107			-3.5	%
Debt Ratio 7											41.7	%		35.6	%	610 B		P
Total Employees											307,550			301,840			1.9	%

1	In-region wireline represents access lines served by AT&T's incumbent local exchange companies.
2	Primarily switched access lines.  Also includes VoIP.
3	Broadband connections include DSL lines, U-verse high speed Internet access and satellite broadband.
4	Video connections include sales under agency agreements with EchoStar and DirecTV customers and U-verse connections.
5	Wholesale lines include 0.2 million lines purchased by AT&T Corp. at 06/30/08 and 0.6 million at 06/30/07.
6	Coin includes both retail and wholesale access lines.
7	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
8	Prior year amounts restated to conform to current period reporting methodology.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliations
Wireless Segment Adjusted OIBDA
Dollars in Millions
Unaudited
Quarter Ended June 30, 2008	Adjusting Items
	GAAP			Intangible Amortization			Adjusted
Service Revenues	$	10,951					$	10,951
Equipment Revenues		1,082						1,082
Total Operating Revenues	$	12,033		$	-		$	12,033
Operating Expenses
Cost of Services and Equipment Sales		4,162			-			4,162
Selling, General and Administrative		3,361			-			3,361
Depreciation and Amortization		1,446			(529	)		917
Total Operating Expenses		8,969			(529	)		8,440
Operating Income		3,064						3,593
Plus: Depreciation and Amortization		1,446						917
OIBDA		4,510						4,510
OIBDA as a % of Service Revenue		41.2	%					41.2	%
Quarter Ended June 30, 2007	Adjusting Items
	GAAP			Integration Costs			Intangible Amortization			Adjusted
Service Revenues	$	9,540								$	9,540
Equipment Revenues		855									855
Total Operating Revenues	$	10,395		$	-		$	-		$	10,395
Operating Expenses
Cost of Services and Equipment Sales		3,941			(48	)		-			3,893
Selling, General and Administrative		3,040			(115	)		-			2,925
Depreciation and Amortization		1,810			(83	)		(737	)		990
Total Operating Expenses		8,791			(246	)		(737	)		7,808
Operating Income		1,604									2,587
Plus: Depreciation and Amortization		1,810									990
OIBDA		3,414									3,577
OIBDA as a % of Service Revenue		35.8	%								37.5	%

OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from Segment operating Income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliations
Reconciliation of Free Cash Flow
Dollars in Millions
Unaudited
June 30, 2008	Three Months Ended		Six Months Ended
Net cash provided by operating activities	$	8,548	$	13,505
Less: Construction and capital expenditures		5,329		9,577
Free Cash Flow	$	3,219	$	3,928

Free cash flow is defined as cash from operations minus capital expenditures. We believe these metrics provide useful information to our investors because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it. Management also views free cash flow as a measure of cash available to pay debt and return cash to shareowners.

Financial Data
AT&T Inc.
Non-GAAP Consolidated Reconciliations
Adjusted and Reported Wireline Operating Expenses
Dollars in Millions
Unaudited
	Three Months Ended
	6/30/08		6/30/07		YoY % Change
Reported Wireline Operating Expenses	$	14,496	$	14,803		-2.1	%
Operating Adjustments
Cash Integration Costs		-		141		-
Intangible Amortization		432		578		-25.3	%
Total Adjusting Items		432		719		-39.9	%
Adjusted Wireline Operating Expenses	$	14,064	$	14,084		-0.1	%

Adjusted Wireline operating expenses differs from reported operating expenses in that it excludes the merger-related expenses shown above and provides additional comparability to prior periods.

EX-99.3

EXHIBIT 99.3

OIBDA DISCUSSION

OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA margin is calculated as OIBDA divided by service revenues. OIBDA differs from Segment Operating Income (Loss), as calculated in accordance with GAAP, in that it excludes depreciation and amortization. OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with generally accepted accounting principles. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.

We believe these measures are relevant and useful information to our investors as they are part of AT&T Mobility’s internal management reporting and planning processes and are important metrics that AT&T Mobility’s management uses to evaluate the operating performance of its regional operations. These measures are used by management as a gauge of AT&T Mobility’s success in acquiring, retaining and servicing subscribers because we believe these measures reflect AT&T Mobility’s ability to generate and grow subscriber revenues while providing a high level of customer service in a cost-effective manner. Management also uses these measures as a method of comparing AT&T Mobility’s performance with that of many of its competitors. The financial and operating metrics which affect OIBDA include the key revenue and expense drivers for which AT&T Mobility’s operating managers are responsible and upon which we evaluate their performance.

OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA excludes other, net, minority interest in earnings of consolidated entities and equity in net income (loss) of affiliates, as these do not reflect the operating results of AT&T Mobility’s subscriber base and its national footprint that AT&T Mobility utilizes to obtain and service its customers. Equity in net income (loss) of affiliates represents AT&T Mobility’s proportionate share of the net income (loss) of affiliates in which it exercises significant influence, but does not control. As AT&T Mobility does not control these entities, our management excludes these results when evaluating the performance of our primary operations. OIBDA excludes interest expense and the provision for income taxes. Excluding these items eliminates the expenses associated with its capitalization and tax structures. Finally, OIBDA excludes depreciation and amortization, in order to eliminate the impact of capital investments.

We believe OIBDA as a percentage of service revenues to be a more relevant measure of AT&T Mobility’s operating margin than OIBDA as a percentage of total revenue. AT&T Mobility generally subsidizes a portion of its handset sales, all of which are recognized in the period in which AT&T Mobility sells the handset. This results in a disproportionate impact on its margin in that period. Management views this equipment subsidy as a cost to acquire or retain a subscriber, which is recovered through the ongoing service revenue that is generated by the subscriber. AT&T Mobility also uses service revenues to calculate margin to facilitate comparison, both internally and externally with its competitors, as they calculate their margins using services revenue as well.

There are material limitations to using these non-GAAP financial measures. OIBDA and OIBDA margin, as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these performance measures do not take into account certain significant items, including depreciation and amortization, interest expense, tax expense and equity in net income (loss) of affiliates, which directly affect AT&T Mobility’s net income. Management compensates for these limitations by carefully analyzing how its competitors present performance measures that are similar in nature to OIBDA as we present it, and considering the economic effect of the excluded expense items independently as well as in connection with its analysis of net income as calculated in accordance with GAAP. OIBDA and OIBDA margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.

FREE CASH FLOW DISCUSSION

Free cash flow is defined as cash from operations minus capital expenditures.  Free cash flow after dividends is defined as cash from operations minus capital expenditures and dividends.  Free cash flow yield is defined as cash from continuing operations less capital expenditures as a percentage of market capitalization computed on the last trading day of the quarter.  Market capitalization is computed by multiplying the end of period stock price by the end of period shares outstanding.  We believe these metrics provide useful information to our investors because management monthly reviews free cash flow as an important indicator of how much cash is generated by normal business operations, including capital expenditures, and makes decisions based on it.  Management also views it as a measure of cash available to pay debt and return cash to shareowners.