SBC Investor UpdateCIBC World MarketsCommunications & Technology Food Chain ConferenceJ U N E 8, 2 0 0 4
Randall StephensonChief Operating OfficerSBC Communications Inc.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in SBC’s filings with the Securitiesand Exchange Commission. SBC disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise.
This presentation 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.sbc.com/investor_relations.
Significant Areas Of Opportunity
1Bundling
2Wireless
3Large Business
4 Cost Structure
Key Focus Areas
50% consumer key product bundle penetration
Bundles
On track to close AT&T Wireless acquisition this yearWireless
Large BusinessMarket
Nationwide IP network in place, expanded global sales unit, winning contracts
Expect new labor agreement and retiree plan changes to yield savings approaching $2 billion over next five years
Cost Structure
Bundlingopportunity
and execution
• 2.6 millionLD lines added in 1Q04
• 9.4 millionLD lines added over past four quarters
BundlingStrong Long Distance Growth
9.8
3Q031Q03
In-ServiceInterLATA PICs
(in millions)
YOY Growth Total LD Revenue
7.6
2Q03
11.5
4Q03
(2.2)%
4.1%
12.5%
14.427.6%
1Q04 3Q031Q03 2Q03 4Q03 1Q04
29.6%17.0
BundlingRobust DSL Growth
DSL Net Adds(in thousands)
4Q01 1Q03 1Q04
1.5 million DSL lines added over
past four quarters146
446
183
213226
245270
304
365377
• 9th consecutive quarterof accelerated net adds
• Driven by continuous innovation– Launched 1.5 – 3.0
Mbps speed tier service– Strengthened retail and
online distribution; 20% of consumer sales from alternate channels
1Q02 2Q02 3Q02 4Q02 2Q03 3Q03 4Q03
SBC
Verizon
Comcast
Cox CableTime Warner
BellSouth
304
270
245
SBC 4.0Verizon 2.7BellSouth 1.6
Comcast 5.7Time Warner 3.4Cox 2.1
365
377
Broadband Net Adds(in thousands)
DSL/Cable Modem Lines in Service
End of 1Q04,in Millions
450
350
250
150
4Q02 1Q03 2Q03 3Q03 4Q03 1Q04
446
BundlingStrong DSL Trends
BundlingSuccessful SBC | DISH Network Launch
Installed Base
America’s Top 120
52%
America’s Top 120
52%
America’s Top 180
18%
America’s Top 180
18%
DISH Latino 13%
DISH Latino 13%
• Launched service in March
• ARPU above $60
• Nearly 80% of the customers are bundling satellite with at least one other key service … LD, DSL or wireless
America’s Top 60 17%
America’s Top 60 17%
19%23%
31%
Key Product Bundlescustomers with bundles including one
or more key services – LD, DSL, wireless or satellite video
36%
2Q034Q02 1Q03 3Q03
44%
4Q03
The Future Of Bundling
50%
1Q04
• Average monthly revenue for customers in a bundle is more than doublethat of those without a bundle
• Next steps in bundling:
– Increased penetration
– Growth in video
– IP functionality, unified messaging
Wirelessopportunity
and execution
Cingular WirelessSolid Organic Subscriber Growth
• 554,000 net adds –nearly triple last year’s first quarter
• 2.5 million gross adds – third straight quarterwith gross adds at or above this level
1Q03 2Q03 1Q04
22.1
22.6
24.6
3Q03 4Q03
23.4
24.0
2.5 million net addsover past four quarters
Cellular/PCS Subscribers in Service(in millions)
1Q 2004 Results …
Cingular WirelessNetwork Advances
4Q032Q03
Cingular SubscribersWith GSM-Capable
Handsets
3Q03
35%
1Q04
45%
53% • 100% GSM/GPRSnetwork coverage targeted for July, six months ahead of schedule
• 96% of first-quarter postpaid gross adds were GSM
• EDGE networksubstantially complete this summer
27%
66% of Cingular’s minutes now on
GSM/GPRS network
Cingular Wireless
SacramentoSan Jose
SanFrancisco
Portland
Seattle
Los Angeles
San DiegoPhoenix
Las Vegas
Salt LakeCity Denver Kansas City
St. Louis
Minneapolis
Milwaukee
Chicago
CincinnatiLouisville
NashvilleMemphisOklahoma City
Dallas
San Antonio Houston New Orleans
BirminghamAtlanta
Jacksonville
OrlandoTampaWest Palm BeachMiami
CharlotteGreensboro
Norfolk
BaltimoreWashington, D.C.
New York
BostonBuffaloCleveland
Pittsburgh
Licensed Spectrum
(includes AT&T Wireless affiliates)
Cingular + AT&T Wireless
SacramentoSan Jose
Portland
Seattle
Los Angeles
San DiegoPhoenix
Las Vegas
Salt LakeCity Denver Kansas City
St. Louis
Milwaukee
Chicago
CincinnatiLouisville
NashvilleMemphisOklahoma City
Dallas
San Antonio Houston New Orleans
BirminghamAtlanta
Jacksonville
OrlandoTampa
Miami
Charlotte
BaltimoreNew York
BostonBuffaloCleveland
Pittsburgh
SanFrancisco
West Palm Beach
GreensboroNorfolk
Minneapolis
Washington, D.C.
Acquisition Summary
• Transaction expected to close this year
• $2.5 billion T-Mobile transaction contingent on closing Cingular acquisition of AT&T Wireless
• Significant synergies – expect annual operating expense and cap ex synergies between $2.0 billion and $2.7 billion by 2007
• Recent experience successfully integratinglarge-scale wireless operations
• Will be prepared to begin integration on closing
Large Business Market
opportunity and execution
Leader In Data Revenues
1Q04 Total Data Revenues
(dollars in billions)
SBCBellSouth Verizon
$2.6B
$1.9B
$1.1
• Largest data revenue stream among RBOCs
• 40% higher than closest peer
Large-Business Opportunity
10%$14B
SBC Market Share Today
$140BBusiness Telecom Market
(voice and data)SBC’s immediate large business target –companies with more than 50% of their locations in territory – represents $34 billion annual revenue opportunity
$140 billion includes voice, data, managed services, CPE, and wireless in small, medium and GEM business within the SBC footprint plus nationwide enterprise businesses. Source: Bain & Co.
Products SalesService
Capabilities
Broad range of flexible bandwidth solutions
Managed Services
Single Global
Accounts sales team
4,300 advanced data certifications
Single contracts,
service level agreements
Expanded Capabilities, Solid Traction
National ATM and Frame backbone, IP network
Network
Expect approximately $200 million in incrementalrevenues from contracts signed this year
opportunity and execution
Cost Structure
Margins
SBC Operating Income Margin
• Excluding lump-sum payments and strike-related costs, expect full-year operating income margins in 14.5% to 15.5% range, with quarter to quarter variation.
4Q03 1Q04
15.5%
13.4% Before Severance
12.0% Reported
SBC Consolidated results, excludes Cingular.
Labor Agreement
2.3% average annual increase, versus 4.1% under previous contract
Lower Rate of Base Wage Growth
Increased Flexibility in Force Management
Number of geographic areas for job offers reduced from 23 to 17
Greater Health-Care Cost Sharing
Increased co-payments for active employees and retirees
Overall savings expected to approach $2 billion over five-year period
Long Term Cost Initiatives
• Standardizing technology platforms
• Automating processes
• Consolidating centers to drive efficiencies and improved service
– Call centers
– Network centers
Clear goal:move to best in class in terms of operating efficiency and performance
SBC In Summary
• Solid Operational Momentum
• Financial Strength
• Focused on Significant Areas of Opportunity
1. Bundling
2. Cingular Wireless
3. Large Business Market
4. Cost Structure
SBC Investor UpdateCIBC World MarketsCommunications & Technology Food Chain ConferenceJ U N E 8, 2 0 0 4
Randall StephensonChief Operating OfficerSBC Communications Inc.