T Company Profile

History

AT&T, formerly known as SBC Communications Inc. (SBC), was formed as one of several regional holding companies created to hold AT&T Corp.'s (ATTC) local telephone companies. On January 1, 1984, we were spun-off from ATTC pursuant to an anti-trust consent decree, becoming an independent publicly traded telecommunications services provider. At formation, we primarily operated in five southwestern states. Our subsidiaries merged with Pacific Telesis Group in 1997, Southern New England Telecommunications Corporation in 1998 and Ameritech Corporation in 1999, thereby expanding our wireline operations as the incumbent local exchange carrier (ILEC) into a total of 13 states. On November 18, 2005, one of our subsidiaries merged with ATTC, creating one of the world's largest telecommunications providers. In connection with the merger, we changed the name of our company from 'SBC Communications Inc.' to 'AT&T Inc.' Our services and products are marketed under the AT&T and during a transition period our former name SBC, brand names as well as several other brands including Cingular Wireless (Cingular), through our joint venture with BellSouth Corporation (BellSouth); AT&T Yahoo! through our alliance with Yahoo! Inc.; and prior to the amendment discussed below, AT&T'|'DISH Network through our agreement with EchoStar Communications Corp. (EchoStar).

Scope

We rank among the largest providers of telecommunications services in the United States and the world. Through our subsidiaries and affiliates, we provide communications services and products in the U.S. and in 240 countries. We offer our services and products to consumers in the U.S. and services and products to businesses and other providers of telecommunications services worldwide.

The services and products that we offer vary by market, and include: local exchange services, wireless communications, long-distance services, data/broadband and internet services, telecommunications equipment, managed networking, and wholesale transport services and directory advertising and publishing. In 2004, we began offering satellite television services through our agreement with EchoStar, which was subsequently amended in September 2005, to an agency agreement under which we will continue marketing the co-branded AT&T | DISH Network satellite television service but will receive only commission revenues when signing up future customers. We group our operating subsidiaries as follows, corresponding to our operating segments for financial reporting purposes:

AT&T wireline subsidiaries (i.e., SBC's traditional wireline subsidiaries) provide primarily landline telecommunications services in thirteen states,

AT&T Corp. subsidiaries provide landline telecommunications services to large business and governmental customers, and to a lesser degree to small- and mid-sized businesses and residential consumers,

Cingular provides both wireless voice and data communications services across the U.S. and is held by a wireless subsidiary of AT&T,

directory subsidiaries provide services related to directory advertising and publishing,

international subsidiaries, other than those acquired in our acquisition of ATTC, hold investments with primarily international operations, and

other subsidiaries provide primarily corporate operations and also our paging services, which was sold in November 2005.

We provide telecommunications services throughout the U.S. and internationally. Our traditional wireline subsidiaries operate in thirteen states: Arkansas, California, Connecticut, Illinois, Indiana, Kansas, Michigan, Missouri, Nevada, Ohio, Oklahoma, Texas and Wisconsin (13-state area). Wireline local exchange services offered in our 13-state area are provided through regulated subsidiaries which operate within authorized regions subject to regulation by each state in which they operate and by the Federal Communications Commission (FCC). Subsidiaries of our AT&T Corp. segment provide services both domestically and internationally with domestic services subject to regulation by various states and the FCC. Additional information relating to regulation is contained under the heading 'Government Regulation' below and in the 2005 AT&T Annual Report to Stockholders under the heading 'Operating Environment and Trends of the Business,' and is incorporated herein by reference pursuant to General Instruction G(2).

Our acquisition of ATTC will help change the focus of our company towards business and broadband/data revenues. Cingular's late 2004 acquisition of AT&T Wireless Services Inc. (AT&T Wireless) also increased our potential for growth in the wireless area. Discussed below are the factors upon which we are focusing in 2006.

Business Markets

With the acquisition of ATTC, we expect to strengthen the reach and sophistication of our network facilities and our ability to offer a variety of global communications services to large businesses worldwide. We expect significant opportunity in the small and medium business markets and to increase our governmental and large-business (referred to as 'enterprise') customer base. We also expect to extend our wholesale business to other service products and systems integrations.

Data/Broadband

Project Lightspeed In June 2004, we announced key advances in developing a network capable of delivering a new generation of integrated digital television, super-high-speed broadband and Voice over Internet Protocol (VoIP) services to our residential and small business customers, referred to as Project Lightspeed. We have been building out this network in numerous locations and began providing services in one limited market, including Internet Protocol (IP) video, in late 2005. Our goal in this controlled initial launch is to ensure all operating and back-office systems function at a level capable of supporting our targeted mid-2006 scaled-up deployment. To that end, we have restricted the number of customers and services offered to the necessary minimum. Subject to successful results from this controlled launch and successful testing of our additional IP video services, we plan to enter additional markets in mid-2006. At that time we expect to add additional services and features to our service offerings. We expect to have the capability to offer service to approximately 18 million households by the end of 2008, as part of our initial deployment, and expect to spend approximately $4.4 billion in network related deployment costs and capital expenditures beginning in 2006 through 2008 as well as additional success-based customer activation capital expenditures.

With respect to our IP video service (marketed under AT&T U-verse TV) we continue to work with our vendors to develop, in a timely manner, the requisite hardware and software technology. Our deployment plans could be delayed if we do not receive the required equipment and software on schedule. We also continue to negotiate with programming owners (e.g., movie studios and cable networks) for permission to offer existing television programs and movies and, if applicable, other new interactive services we could offer in the future using advances in the IP technology we are testing. Our ability to provide an attractive and profitable video offering will depend in large part on the results of these efforts. We are supporting legislation at both the federal and state levels that would streamline the regulatory process for new video competitors to enter the market. If the legislation or regulatory outcomes are not as we expect, it could have a material adverse effect on the cost, timing and extent of our deployment plans. Additional information about Project Lightspeed is included in our 'Operating Environment and Trends of the Business' section under the heading 'Expected Growth Areas' on page 34 of the 2005 AT&T Annual Report to Stockholders and is incorporated herein by reference pursuant to General Instruction G(2).

Voice over Internet Protocol VoIP is generally used to describe the transmission of voice using internet-protocol-based technology rather than a traditional wire and switch-based telephone network. A company using this technology often can provide voice services at a lower cost because this technology uses bandwidth more efficiently than a traditional network and because this technology has not been subject to traditional telephone industry regulation. But, depending on the bandwidth allocated, VoIP services may not necessarily be of the same quality as traditional telephone service. In early 2004, the FCC opened a proceeding to establish the regulatory framework for IP-enabled services, including VoIP. In this ongoing proceeding, the FCC will address various regulatory issues, including universal service, intercarrier compensation, numbering, disability access, consumer protection and customer access to 911 emergency services.

Notwithstanding the unresolved regulatory questions before the FCC and various state public utility commissions, numerous communications providers have begun providing various forms of VoIP or announced their intentions to do so in the near future. These providers include both established companies as well as new entrants. Thus, while the deployment of VoIP will result in increased competition for our voice services, it also presents growth opportunities for us to develop new products for our customers. Additional information relating to VoIP is contained in the 2005 AT&T Annual Report to Stockholders in our 'Regulatory Developments' section under the heading 'Voice over Internet Protocol,' and is incorporated herein by reference pursuant to General Instruction G(2).

Wireless

Cingular, our wireless joint venture with BellSouth, began operations in October 2000 and in October 2004 acquired AT&T Wireless. As of December 31, 2005, Cingular served approximately 54.1 million customers and is the largest provider of mobile wireless voice and data communications services in the U.S. Additional information on the merger and our funding sources is contained in the 2005 AT&T Annual Report to Stockholders in Note 16 and is incorporated herein by reference pursuant to General Instruction G(2).

As part of the merger of Cingular and AT&T Wireless, ATTC retained the right to offer products under the AT&T Wireless brand. In November 2005, following our merger with ATTC, we announced that where the joint venture agreement allows, we intend to sell Cingular services using the AT&T Wireless brand. Revenues from AT&T Wireless customers are recorded by Cingular and are recognized as equity in net income in our Consolidated Statements of Income and are recorded in our Cingular segment for segment reporting.

Cingular's wireless networks use equipment with digital transmission technologies known as Global System for Mobile Communication (GSM) technology and Time Division Multiple Access (TDMA) technology. Cingular has upgraded its existing TDMA markets to use GSM technology in order to provide a common voice standard. Cingular is also upgrading its network wireless data technology by adding General Packet Radio Services (GPRS) and Enhanced Data Rates for GSM Evolution (EDGE), which allows customers to access the Internet from their wireless devices at higher speeds than GPRS. Cingular will continue to deploy Universal Mobile Telecommunications System (UMTS) third generation (3G) network technology with High-Speed Downlink Packet Access (HSDPA) concurrent with its network integration. UMTS and HSDPA provide superior speeds for data and video services, as well as operating efficiencies using the same spectrum and infrastructure for voice and data on an IP-based platform.