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) October 22, 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 October 22, 2008, its results of operations for the third 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 October 22, 2008 reporting financial results for the third quarter ended September 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: October 22, 2008	By: /s/ John J. Stephens       John J. Stephens       Senior Vice President and Controller

EX-99.1

For more information, contact:

McCall Butler

Office: 214-665-1313

Mobile: 917-209-5792

mbutler@attnews.us

Strong Wireless Gains, Sound Operational Execution Highlight AT&T’s Third Quarter;

Results Led by 2.4 Million iPhone 3G Activations,

Rapid Wireless Data Growth

§   $0.55 reported earnings per diluted share versus $0.50 in the year-earlier quarter

§   $0.67 adjusted earnings per diluted share – which includes $0.10 of pressure generated by strong performance from the Apple iPhone 3G initiative and $0.02 from hurricane-related expenses – compared with $0.71 in the third quarter of 2007

§   2.4 million iPhone 3G devices activated in the quarter, approximately 40 percent of them to wireless customers who were new to AT&T; iPhone 3G delivering high-value subscribers with significantly higher ARPU and lower churn than postpaid subscriber average

§   2.0 million net gain in total wireless subscribers to reach 74.9 million in service

§   1.7 million net gain in retail postpaid wireless subscribers, up nearly 40 percent versus year-earlier third quarter; largest total for any quarter in AT&T’s history

§   50.5 percent growth in wireless data revenues from Internet access, messaging, e-mail and related services; total wireless revenues up 15.4 percent

§   Strong ramp in AT&T U-verse TV subscribers, with a net subscriber gain of 232,000 to reach 781,000 in service; solidly on track to exceed 1 million subscribers in service by the end of 2008

§   16.2 percent increase in wireline IP data revenues driven by expansion in AT&T U-verseSM services and growth in business products such as Virtual Private Networks (VPNs), managed Internet services and hosting

§   Major turnaround and return to growth in wholesale revenues, reflecting solid demand from wireless carriers, Internet service providers and other customers

Note: AT&T’s third-quarter earnings conference call will be broadcast live via the Internet at 10 a.m. ET on Wednesday, Oct. 22, 2008, at www.att.com/investor.relations.

DALLAS, Oct. 22, 2008 — AT&T Inc. (NYSE:T) today reported third-quarter results that are highlighted by strong wireless gains and stable trends in business services, including continued double-digit IP data growth and a major turnaround in wholesale revenue growth.

Wireless growth was driven by a significant step up in retail postpaid subscriber additions, continued rapid adoption of wireless data services and robust demand for integrated devices, led by the Apple iPhone 3G. Activations of the iPhone 3G — which was launched in the United States as an AT&T exclusive on July 11 — totaled 2.4 million in the quarter, approximately 40 percent of them to new wireless AT&T customers.

“I am particularly pleased with the customer response to the iPhone 3G,” said Randall Stephenson, AT&T chairman and chief executive officer. “The new customers we’re winning are high-value, with attractive revenue and churn profiles. We’re expanding the market, as users adopt more data and media-rich services and access a wide array of applications. These achievements are positive for the future of our business.

“Across our operations, AT&T continues to execute and deliver solid results. In wireless, we posted a record postpaid subscriber gain. Trends in business services continue to be stable, with a major turnaround in wholesale revenue growth. AT&T U-verse video gains continue to accelerate, helping transform our consumer business.

“There are a number of things that set AT&T apart. Our company has premier assets, a sound balance sheet, solid cash flow and an excellent record of returning value to shareowners. These fundamentals, combined with an intense focus on execution, provide a solid foundation for AT&T’s future.”

Reported Results

For the quarter ended Sept. 30, 2008, AT&T’s consolidated revenues totaled $31.3 billion, up 4.0 percent versus reported results in the year-earlier quarter and up 3.3 percent compared with third-quarter 2007 pro forma revenues, which exclude merger-related accounting impacts on directory revenues.

Consolidated revenue growth was driven by 15.4 percent growth in wireless revenues and a 16.2 percent increase in wireline IP data revenues, which includes AT&T U-verse services and business offerings such as VPNs, managed Internet services and hosting. Gains in these areas more than offset pressures in the macro-environment and a decline in wireline consumer voice, which was consistent with trends in recent quarters.

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Compared with results for the year-earlier quarter, AT&T’s reported operating expenses for the third quarter of 2008 were $25.7 billion versus $24.8 billion; reported operating income was $5.6 billion, up from $5.3 billion; and AT&T’s reported operating income margin was 17.9 percent, up from 17.6 percent.

AT&T’s reported third-quarter 2008 net income totaled $3.2 billion, up from $3.1 billion in the year-earlier quarter, and reported earnings per diluted share totaled $0.55, up from $0.50 in the third quarter of 2007.

Adjusted Results

AT&T’s adjusted results for the third quarter of 2008 exclude noncash merger-related amortization expenses. For the third 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 third quarter of 2008 totaled $24.6 billion versus $23.1 billion; adjusted operating income was $6.7 billion, compared with $7.2 billion; and AT&T’s adjusted operating income margin was 21.4 percent versus 23.7 percent. AT&T’s adjusted third-quarter 2008 net income totaled $3.9 billion versus $4.3 billion in the year-earlier quarter, and adjusted earnings per diluted share totaled $0.67, compared with $0.71 in the third quarter of 2007.

iPhone 3G Impacts and Hurricane-Related Expenses

AT&T’s third-quarter 2008 reported and adjusted margins and earnings reflect revenue growth and continued progress with previously outlined cost initiatives, offset by hurricane-related expenses and effects on wireless results from the iPhone 3G. Impacts from the company’s iPhone 3G initiative reduced pretax third-quarter earnings by approximately $900 million or $0.10 per share, and costs related to hurricanes reduced pretax earnings by approximately $145 million or $0.02 per share.

Based on third-quarter customer response, AT&T is optimistic regarding continued strong iPhone 3G activations and is confident in the long-term value created by this investment in acquiring high-value, data-centric wireless subscribers. As a result, AT&T expects its dilution associated with the iPhone 3G will run above its previous expectation, and AT&T now expects, depending on volumes, its full-year 2008 wireless service OIBDA margin to be better than 37 percent versus its previous outlook of 39 percent to 40 percent. AT&T expects its full-year adjusted consolidated operating income margin to be approximately 23 percent versus its previous outlook of approximately 24 percent.

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Cash From Operations

AT&T’s cash from operating activities for the third quarter of 2008 totaled $9.3 billion, capital expenditures totaled $5.3 billion and free cash flow (cash from operations minus capital expenditures) totaled $4.0 billion. Through the first three quarters of 2008, cash from operating activities totaled $22.8 billion, capital expenditures totaled $14.8 billion and free cash flow totaled $7.9 billion. AT&T continues to expect full-year 2008 capital expenditures in the mid-teens as a percentage of total revenues and expects full-year 2008 free cash flow of approximately $14 billion.

Through the first three quarters of 2008, dividends paid totaled $7.2 billion, shares repurchased totaled 164.2 million for $6.1 billion and AT&T ended the third quarter with 5.9 billion shares outstanding.

Wireless Operational Highlights

AT&T delivered strong wireless growth in the third quarter, powered by a significant step up in retail postpaid subscriber gains, robust iPhone 3G activations and continued rapid growth in advanced data services. Highlights include the following:

Strongest Postpaid Net Add Quarter in Company’s History. In the third quarter, AT&T posted the largest postpaid net subscriber gain for any quarter in its history. Retail postpaid net subscriber additions of 1.7 million were up nearly 40 percent versus results in the year-earlier third quarter and accounted for more than 85 percent of AT&T’s 2.0 million total wireless net adds. Total monthly subscriber churn in the third quarter was 1.7 percent, flat with results for the year-earlier quarter, and postpaid churn was 1.2 percent, down from 1.3 percent in the third quarter of 2007.

2.4 Million Apple iPhone 3G Activations. Postpaid subscriber growth was boosted by the dramatic market success of the iPhone 3G. Third-quarter activations of the iPhone 3G totaled 2.4 million, approximately 40 percent to customers who were new to AT&T. AT&T’s iPhone exclusive has delivered high-value subscribers with ARPU (average monthly revenues per subscriber) approximately 1.6 times higher and churn rates significantly lower than the company’s overall postpaid subscriber base. The iPhone and other integrated devices are key to AT&T’s success in expanding flow share of high-value subscribers. During the third quarter, more than two-thirds of the company’s postpaid net adds came from customers choosing an integrated device, and 22.0 percent of AT&T’s postpaid wireless subscribers now have an integrated device, up from 10.5 percent one year earlier.

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50.5 Percent Wireless Data Revenue Growth. AT&T’s wireless data revenues grew 50.5 percent versus the year-earlier quarter to $2.7 billion, reflecting strong increases in areas such as Internet access, messaging, e-mail and related services. Wireless Internet access revenues more than doubled versus results for the year-earlier quarter, and multimedia message volumes were also more than double third-quarter 2007 levels.

15.4 Percent Total Wireless Revenue Growth. Driven by subscriber gains and data growth, AT&T’s total wireless revenues increased 15.4 percent to $12.6 billion, and wireless service revenues, which exclude handset and accessory sales, grew 14.3 percent to $11.3 billion. Retail postpaid subscriber ARPU was $58.99, up 2.6 percent versus the year-earlier third quarter.

Wireless Margins. On a reported basis, third-quarter wireless operating expenses totaled $10.2 billion, operating income was $2.4 billion and AT&T’s wireless operating income margin was 18.9 percent versus 18.0 percent in the year-earlier third quarter. On an adjusted basis, third-quarter wireless operating expenses totaled $9.7 billion, operating income was $2.9 billion and AT&T’s wireless operating income margin was 22.8 percent versus 26.4 percent in the year-earlier third quarter. AT&T’s third-quarter wireless OIBDA service margin was 33.5 percent versus an unadjusted 37.3 percent and an adjusted 39.1 percent in the year-earlier quarter. In addition to operational improvements, year-over-year margin comparisons reflect approximately $900 million of pressure associated with the iPhone 3G and approximately $55 million of expenses due to hurricanes. Without the iPhone and hurricane impacts, AT&T’s third-quarter wireless OIBDA service margin would have been approximately 42 percent. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

Wireline Operational Highlights

AT&T’s third-quarter wireline results were highlighted by continued strong double-digit growth in IP-based data revenues, a substantial turnaround in wholesale revenues and a further ramp in AT&T U-verse TV subscribers. Highlights include the following:

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Strength in Business. AT&T’s total business revenues — comprised of enterprise, regional and wholesale customer categories — grew 0.3 percent versus the year-earlier quarter to $11.5 billion. In the third quarter, AT&T delivered a return to growth in wholesale revenues, extending a major turnaround of trends in this category over the past year. Wholesale revenues totaled $3.5 billion, up 0.8 percent sequentially and 0.7 percent versus the year-earlier quarter. Regional business revenues increased 0.7 percent sequentially and 2.3 percent versus the year-earlier quarter to $3.2 billion. Regional business data revenues grew 8.4 percent year over year, led by Ethernet and IP data services, including managed Internet and VPNs. IP data and Ethernet, which made up 53.6 percent of AT&T’s regional business data revenues, grew 18.9 percent versus the year-earlier third quarter. Enterprise revenues totaled $4.7 billion, up 0.8 percent sequentially and down 1.4 percent versus the year-earlier quarter, reflecting solid sales results with some pressures on voice and data transport volumes. Enterprise fundamentals in terms of closed sales, a strong sales funnel and new service adoption remain solid.

Accelerated Ramp in AT&T U-verse TV Services. AT&T further accelerated its ramp in U-verse TV growth with a net gain of 232,000 subscribers in the third quarter, up from 170,000 added in the second quarter of this year. At the end of the quarter, subscribers to the company’s next-generation, IP-based TV service totaled 781,000, on a trajectory to exceed its target of more than 1 million U-verse TV subscribers by year-end 2008. U-verse network deployment now passes 14 million living units. Rollout of Total Home DVR service is under way and expected to be completed by the end of the year. Attach rates for broadband service continue to be high, at more than 85 percent.

16.2 Percent Growth in Wireline IP Data Revenues. Driven by expansion in AT&T

U-verse services and growth in business products such as VPNs, managed Internet services and hosting, AT&T posted its fourth consecutive quarter of strong mid-teens growth in total wireline IP data revenues. Consumer IP data revenues, which include broadband and U-verse services, grew 19.0 percent, and business IP data revenues were up 14.7 percent. IP data now accounts for 44.0 percent of AT&T’s total wireline data revenues.

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Broadband Connection Growth. At the end of the third quarter, AT&T’s wireline broadband subscribers totaled 14.8 million, up 148,000 in the quarter and 1.1 million over the past year. Customers increasingly use both wireline and wireless connections for broadband connectivity, as reflected in AT&T’s strong growth in wireless LaptopConnect cards and integrated devices. In recognition of this trend, AT&T now also provides data on total broadband connections, which combines wireline and wireless subscribers. Total broadband-capable connections in service increased 2.9 million in the third quarter to reach 20.7 million. (Wireless broadband connections include data users with 3G LaptopConnect cards and broadband-speed integrated devices with a QWERTY or touch-screen keyboard.)

Growth in Regional Consumer ARPU. Reflecting growth in wireline broadband and U-verse services, AT&T’s revenues per consumer household served increased 4.3 percent versus the year-earlier third quarter. Regional consumer revenue connections (retail voice, high speed Internet and video) totaled 47.5 million at the end of the quarter versus 49.6 million at the end of the third quarter of 2007 and 48.4 million at the end of the second quarter of 2008. Total consumer broadband and TV connections over the past year increased by 1.9 million. Total regional consumer revenues were $5.5 billion, down 3.8 percent. This reflects operational trends and a change in AT&T’s relationship with Yahoo!® Inc., which provides portal services to AT&T’s nearly 15 million wireline broadband subscribers. Under the new arrangement, announced in the second quarter of 2008, AT&T no longer pays monthly portal fees and receives a reduced level of shared advertising revenues from Yahoo!

Wireline Expenses. AT&T’s reported third-quarter wireline operating expenses totaled $14.8 billion, down 1.1 percent from results in the year-earlier quarter, and on an adjusted basis, wireline operating expenses were $14.4 billion versus $14.4 billion in the third quarter of 2007. In addition to operational trends and progress on cost initiatives, third-quarter wireline cost trends also include expenses of approximately $90 million related to hurricanes.

Additional Background on Adjusted and Pro Forma Results

AT&T’s adjusted earnings for the third quarter of 2008 exclude noncash, pretax amortization costs related to acquisitions totaling $1.1 billion or $0.12 per diluted share. Adjusted results for the third quarter of 2007 excluded: (1) pretax cash merger-related integration costs totaling $322 million or $0.04 per diluted share; (2) noncash, pretax merger-related costs totaling $1.4 billion or $0.16 per diluted share; and (3) a merger-related directory accounting impact of $132 million or $0.01 per diluted share.

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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 third-quarter 2007 consolidated revenues by $196 million and consolidated operating expenses by $64 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. In 2008, AT&T again ranked No. 1 on Fortune magazine’s World’s Most Admired Telecommunications Company list and No. 1 on America’s Most Admired Telecommunications Company list. Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com.

© 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.

Note: This AT&T news release and other announcements are available as part of an RSS feed at www.att.com/rss. For more information, please review this announcement in the AT&T newsroom at http://www.att.com/newsroom.

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.

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NOTE: Free cash flow is defined as cash from operations minus capital expenditures. We believe this metric provides 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.

NOTE: Adjusted consolidated operating income margins and wireless service OIBDA margins less the impacts of the iPhone 3G initiative and hurricane-related expenses are intended to provide useful information for investors. Management views the dilution from the iPhone 3G initiative and hurricane-related costs as having a short term impact on the business.

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 Delivers Solid Second-Quarter Results

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

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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									Nine Months Ended
	9/30/2008			9/30/2007			% Ch		g	9/30/2008			9/30/2007		% Ch		g
Operating Revenues
Wireless service	$	11,227		$	9,834			14.2	%	$	32,726		$	28,417		15.2	%
Voice		9,313			10,164			-8.4	%		28,525			30,997		-8.0	%
Data		6,144			5,880			4.5	%		18,170			17,281		5.1	%
Directory		1,333			1,240			7.5	%		4,114			3,417		20.4	%
Other		3,325			3,014			10.3	%		9,417			8,467		11.2	%
Total Operating Revenues		31,342			30,132			4.0	%		92,952			88,579		4.9	%
Operating Expenses
Cost of services and sales (exclusive of
depreciation and amortization shown separately below)		13,070			11,736			11.4	%		36,972			34,816		6.2	%
Selling, general and administrative		7,676			7,770			-1.2	%		22,976			22,497		2.1	%
Depreciation and amortization		4,978			5,322			-6.5	%		14,839			16,354		-9.3	%
Total Operating Expenses		25,724			24,828			3.6	%		74,787			73,667		1.5	%
Operating Income		5,618			5,304			5.9	%		18,165			14,912		21.8	%
Interest Expense		858			887			-3.3	%		2,577			2,639		-2.3	%
Equity in Net Income of Affiliates		257			162			58.6	%		712			545		30.6	%
Other Income (Expense) - Net		(81	)		(17	)		-			(91	)		614		-
Income Before Income Taxes		4,936			4,562			8.2	%		16,209			13,432		20.7	%
Income Taxes		1,706			1,499			13.8	%		5,746			4,617		24.5	%
Net Income	$	3,230		$	3,063			5.5	%	$	10,463		$	8,815		18.7	%
Basic Earnings Per Share	$	0.55		$	0.50			10.0	%	$	1.76		$	1.43		23.1	%
Weighted Average Common
Shares Outstanding (000,000)		5,893			6,088			-3.2	%		5,938			6,152		-3.5	%
Diluted Earnings Per Share	$	0.55		$	0.50			10.0	%	$	1.75		$	1.42		23.2	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)		5,921			6,129			-3.4	%		5,971			6,196		-3.6	%

Financial Data
AT&T Inc.
Statements of Segment Income
Dollars in millions
Unaudited
	Three Months Ended									Nine Months Ended
Wireless	9/30/2008			9/30/2007			% Ch		g	9/30/2008			9/30/2007			% Ch		g
Segment Operating Revenues
Service	$	11,273		$	9,860			14.3	%	$	32,869		$	28,492			15.4	%
Equipment		1,345			1,077			24.9	%		3,607			2,837			27.1	%
Total Segment Operating Revenues		12,618			10,937			15.4	%		36,476			31,329			16.4	%
Segment Operating Expenses
Cost of services and equipment sales		4,989			4,079			22.3	%		13,261			11,690			13.4	%
Selling, general and administrative		3,849			3,183			20.9	%		10,489			9,136			14.8	%
Depreciation and amortization		1,401			1,709			-18.0	%		4,327			5,410			-20.0	%
Total Segment Operating Expenses		10,239			8,971			14.1	%		28,077			26,236			7.0	%
Segment Operating Income		2,379			1,966			21.0	%		8,399			5,093			64.9	%
Equity in Net Income of Affiliates		-			3			-100.0	%		5			12			-58.3	%
Minority Interest		(57	)		(43	)		-32.6	%		(186	)		(143	)		-30.1	%
Segment Income	$	2,322		$	1,926			20.6	%	$	8,218		$	4,962			65.6	%
Wireline
Segment Operating Revenues
Voice	$	9,515		$	10,356			-8.1	%	$	29,191		$	31,619			-7.7	%
Data		6,401			6,076			5.3	%		18,893			17,918			5.4	%
Other		1,634			1,509			8.3	%		4,698			4,389			7.0	%
Total Segment Operating Revenues		17,550			17,941			-2.2	%		52,782			53,926			-2.1	%
Segment Operating Expenses
Cost of sales		8,128			7,778			4.5	%		23,908			23,396			2.2	%
Selling, general and administrative		3,354			3,868			-13.3	%		10,305			11,354			-9.2	%
Depreciation and amortization		3,331			3,334			-0.1	%		9,770			10,076			-3.0	%
Total Segment Operating Expenses		14,813			14,980			-1.1	%		43,983			44,826			-1.9	%
Segment Income	$	2,737		$	2,961			-7.6	%	$	8,799		$	9,100			-3.3	%
Advertising & Publishing
Segment Operating Revenues	$	1,350		$	1,457			-7.3	%	$	4,174		$	4,378			-4.7	%
Segment Operating Expenses
Cost of sales		461			417			10.6	%		1,321			1,214			8.8	%
Selling, general and administrative		274			338			-18.9	%		972			1,067			-8.9	%
Depreciation and amortization		194			238			-18.5	%		609			743			-18.0	%
Total Segment Operating Expenses		929			993			-6.4	%		2,902			3,024			-4.0	%
Segment Income	$	421		$	464			-9.3	%	$	1,272		$	1,354			-6.1	%
Other
Segment Operating Revenues	$	501		$	562			-10.9	%	$	1,557		$	1,658			-6.1	%
Segment Operating Expenses		420			518			-18.9	%		1,862			1,673			11.3	%
Segment Operating Income(Loss)		81			44			84.1	%		(305	)		(15	)		-
Equity in Net Income of Affiliates		257			159			61.6	%		707			533			32.6	%
Segment Income	$	338		$	203			66.5	%	$	402		$	518			-22.4	%

Financial Data
AT&T Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts
	9/30/08			12/31/07
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	1,594		$	1,970
Accounts receivable - net of allowances for
uncollectibles of $1,328 and $1,364		16,395			16,185
Prepaid expenses		1,657			1,524
Deferred income taxes		1,560			2,044
Other current assets		2,239			2,963
Total current assets		23,445			24,686
Property, Plant and Equipment - Net		97,771			95,890
Goodwill		71,537			70,713
Licenses		46,931			37,985
Customer Lists and Relationships - Net		11,495			14,505
Other Intangible Assets - Net		5,816			5,912
Investments in Equity Affiliates		2,839			2,270
Postemployment Benefit		18,164			17,291
Other Assets		6,530			6,392
Total Assets	$	284,528		$	275,644
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year	$	17,419		$	6,860
Accounts payable and accrued liabilities		18,690			21,399
Advanced billing and customer deposits		3,896			3,571
Accrued taxes		2,976			5,027
Dividends payable		2,357			2,417
Total current liabilities		45,338			39,274
Long-Term Debt		59,355			57,255
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		27,776			24,939
Postemployment benefit obligation		25,493			24,011
Other noncurrent liabilities		14,048			14,798
Total deferred credits and other noncurrent liabilities		67,317			63,748
Stockholders' Equity
Common shares issued ($1 par value)		6,495			6,495
Capital in excess of par value		91,684			91,638
Retained earnings		36,613			33,297
Treasury shares (at cost)		(21,412	)		(15,683	)
Accumulated other comprehensive income(loss)		(862	)		(380	)
Total stockholders' equity		112,518			115,367
Total Liabilities and Stockholders' Equity	$	284,528		$	275,644

Financial Data
AT&T Inc.
Consolidated Statements of Cash Flows
Dollars in millions increase (decrease) in cash and cash equivalents
Unaudited	Nine Months Ended
		9/30/08		9/30/07
Operating Activities
Net income	$	10,463		$	8,815
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		14,839			16,354
Undistributed earnings from investments in equity affiliates		(572	)		(434	)
Provision for uncollectible accounts		1,297			1,142
Deferred income tax expense		4,063			486
Net gain on sales of investments		(2	)		(29	)
Gain on license exchange		-			(409	)
Changes in operating assets and liabilities:
Accounts receivable		(1,597	)		(1,253	)
Other current assets		616			(661	)
Accounts payable and accrued liabilities		(5,958	)		(46	)
Stock-based compensation tax benefit		(15	)		(149	)
Other - net		(361	)		529
Total adjustments		12,310			15,530
Net Cash Provided by Operating Activities		22,773			24,345
Investing Activities
Construction and capital expenditures
Capital expenditures		(14,388	)		(12,124	)
Interest during construction		(455	)		(125	)
Acquisitions, net of cash acquired		(10,086	)		(233	)
Dispositions		1,444			993
Proceeds from sale of securities, net of investments		(103	)		584
Sale of other investments		436			-
Other		33			28
Net Cash Used in Investing Activities		(23,119	)		(10,877	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		5,188			(4,279	)
Issuance of long-term debt		10,924			7,898
Repayment of long-term debt		(3,143	)		(3,008	)
Purchase of treasury shares		(6,077	)		(8,912	)
Issuance of treasury shares		317			1,736
Dividends paid		(7,150	)		(6,584	)
Stock-based compensation tax benefit		15			149
Other		(104	)		(172	)
Net Cash Used in Financing Activities		(30	)		(13,172	)
Net increase (decrease) in cash and cash equivalents		(376	)		296
Cash and cash equivalents beginning of year		1,970			2,418
Cash and Cash Equivalents End of Period	$	1,594		$	2,714

Financial Data
AT&T Inc.
Supplementary Operating and Financial Data
Dollars in millions except per share amounts
Unaudited	Three Months Ended									Nine Months Ended
	9/30/2008			9/30/2007			% Ch		g	9/30/2008			9/30/2007			% Ch		g
Wireless
Wireless Customers (000)											74,871			65,666			14.0	%
Net Customer Additions (000)		1,976			1,993			-0.9	%		4,604			4,640			-0.8	%
M&A Activity, Partitioned Customers and Other Adjs. (000)		13			-			-			215			64			-
Postpaid Customers (000)											58,735			52,689			11.5	%
Net Postpaid Customer Additions (000)		1,693			1,212			39.7	%		3,292			2,804			17.4	%
Postpaid Churn		1.2	%		1.3	%	-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) 6
Retail Consumer Voice Connections 2											28,329			31,658			-10.5	%
Retail Consumer Additional Voice Connections 2											3,526			4,112			-14.3	%
Consumer Broadband Connections 3											12,730			11,716			8.7	%
Video Connections: 4
Satellite Connections											2,182			1,986			9.9	%
U-verse Video Connections											781			126			-
Total Consumer Revenue Connections (000)											47,548			49,598			-4.1	%
Net Consumer Revenue Connection Changes (000)		(869	)		85			-			(1,890	)		737			-
Total Broadband Connections (000) 3, 6											14,841			13,760			7.9	%
Net Broadband Connection Changes (000) 3, 6		148			499			-70.3	%		685			1,590			-56.9	%
Total Video Connections (000) 4											2,963			2,112			40.3	%
Net Video Connection Changes (000) 4		179			215			-16.7	%		616			602			2.3	%
AT&T Inc.
Construction and capital expenditures
Capital expenditures	$	5,068		$	4,664			8.7	%	$	14,388		$	12,124			18.7	%
Interest during construction	$	198		$	47			-		$	455		$	125			-
Dividends Declared Per Share	$	0.4000		$	0.3550			12.7	%	$	1.2000		$	1.0650			12.7	%
End of Period Common Shares Outstanding (000,000)											5,893			6,072			-2.9	%
Debt Ratio 5											40.6	%		35.3	%	530 B		P
Total Employees											303,530			303,670			-

1	In-region wireline represents access lines served by AT&T's incumbent local exchange companies.
2	Includes consumer U-verse voice over IP connections.
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	Total long-term debt plus debt maturing within one year divided by total debt plus total stockholders' equity.
6	Prior year amounts restated to conform to current period reporting methodology.
Note: For the end of 3Q08, total switched access lines were 57,191, business switched access lines totaled 22,159, and wholesale and coin switched access lines totaled 3,281.

Financial Data
AT&T Inc.
Non-GAAP Wireless Reconciliations
Wireless Segment AdjustedOIBDA
Dollars in Millions
Unaudited
Quarter Ended September 30, 2008
	Adjusting Items
	GAAP			Intangible Amortization			Adjusted
Service Revenues	$	11,273					$	11,273
Equipment Revenues		1,345						1,345
Total Operating Revenues	$	12,618		$	-		$	12,618
Operating Expenses
Cost of Services and Equipment Sales		4,989			-			4,989
Selling, General and Administrative		3,849			-			3,849
Depreciation and Amortization		1,401			(499	)		902
Total Operating Expenses		10,239			(499	)		9,740
Operating Income		2,379						2,878
Plus: Depreciation and Amortization		1,401						902
OIBDA		3,780						3,780
OIBDA as a % of Service Revenue		33.5	%					33.5	%
Quarter Ended September 30, 2007
	Adjusting Items
	GAAP			Integration Costs			Intangible Amortization			Adjusted
Service Revenues	$	9,860								$	9,860
Equipment Revenues		1,077									1,077
Total Operating Revenues	$	10,937		$	-		$	-		$	10,937
Operating Expenses
Cost of Services and Equipment Sales		4,079			(60	)		-			4,019
Selling, General and Administrative		3,183			(117	)		-			3,066
Depreciation and Amortization		1,709			(83	)		(658	)		968
Total Operating Expenses		8,971			(260	)		(658	)		8,053
Operating Income		1,966									2,884
Plus: Depreciation and Amortization		1,709									968
OIBDA		3,675									3,852
OIBDA as a % of Service Revenue		37.3	%								39.1	%

OIBDA is defined as operating income (loss) before depreciation and amortization. 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 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
September 30, 2008	Three Months Ended			Nine Months Ended
Net cash provided by operating activities	$	9,268		$	22,773
Less: Construction and capital expenditures		(5,266	)		(14,843	)
Free Cash Flow	$	4,002		$	7,930

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
	9/30/08		9/30/07		YoY % Change
Reported Wireline Operating Expenses	$	14,813	$	14,980		-1.1	%
Operating Adjustments
Cash Integration Costs		-		139		-
Intangible Amortization		396		473		-16.3	%
Total Adjusting Items		396		612		-35.3	%
Adjusted Wireline Operating Expenses	$	14,417	$	14,368		0.3	%

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.