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SBC Investor UpdateMerrill Lynch Global CommunicationsInvestor ConferenceMarch 16, 2004Randall StephensonSenior Executive Vice Presidentand Chief Financial Officer
Cautionary Language ConcerningForward-Looking StatementsInformation set forth in this presentation contains financialestimates and other forward-looking statements that aresubject to risks and uncertainties. A discussion of factorsthat may affect future results is contained in SBC’s filingswith the Securities and Exchange Commission. SBC disclaimsany obligation to update and revise statements contained inthis presentation based on new information or otherwise.This presentation may contain certain non-GAAP financialmeasures. Reconciliations between the non-GAAP financialmeasures and the GAAP financial measures are available onthe company’s Web site at www.sbc.com/investor relations.2
Areas To Cover1. Strategy and Execution– Consumer– Business2. Value Returned to Owners3. Cingular Wireless AT&T Wireless3
Strategy and ExecutionGrowth Products Ended 2003 with record net addsin both LD and DSLBundles More than doubled penetration in 2003 Launched SBC/DISH Network in MarchAccess Lines Over past three quarters, significantimprovement in retail line lossesWireless Growth Strong, high-quality subscriber growth 93% GSM coverage of POPsLarge Business Expanded Global Accounts organization New capabilities4
Record Long Distance GrowthIn-ServiceInterLATA PICs(in millions)YOY GrowthTotal LD Revenue14.427.6%11.5 8.3 millionLD lines addedin 2003,nearly 60%of LD base9.87.6 2.9 millionadded in 35
Strong Growth in DSLDSL Net Adds(in thousands)365377304270213226245183 8 consecutivequarters ofsequentialimprovementin net adds 3.5 millionDLS lines inservice, 40%ahead of closestRBOC peer1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q036
Broadband Growth TrendsBroadband Net Adds(in thousands)DSL/Cable ModemLines in me Warner15050End of 2003,in MillionsSBCVerizonBellSouth3.52.51.5Comcast5.3Time Warner 3.3Cox2.0Cox CableBellSouth4Q021Q032Q033Q034Q037
Growth In Consumer BundlesKey Product Bundlescustomers with bundles including oneor more key services – LD,DSL and wireless44% drive customerretention improve ARPU help stabilizeaccess lines36%31%23%19%4Q02 1Q032Q033Q03Bundles 4Q038
Consumer Access Line TrendsNet Change By Quarter(in )(110)(71)Midwest(62)(199) (126)(104)(133)(239) (296) (301) (106)(184)(217)(289)(323)(379)1Q032Q033Q03 4Q031Q032Q03 3Q03Primary Lines4Q031Q03(398)2Q03 3Q034Q03Additional Lines9
Stable Data Revenues 10 Billion AnnualData Revenue Stream(dollars in millions) 9,639 10,150 1,387 1,832 1,579 1,698Quarterly Data Revenues &YOY Quarterly Growth Rates(dollars in millions) 2,479 2,491 2,576 2,6049.3% 6,6735.5% 6,6203.7%20022003DSL / InternetData IntegrationHi-Cap Transport1Q032.7%2Q033Q034Q03Total Data RevenueYear-Over-Year Growth Rate10
Leader in Data Revenues2003 Total Data Revenues(dollars in billions) 10.2B Largest data revenuestream among RBOCs 7.3B 40% higher thanclosest peer 4.4BBellSouthVerizonSBC11
Large-Business Opportunity 140BBusiness Telecom Market(voice and data)10% 14BSBC MarketShare Today 140 billion includes voice, data, managed services, CPE, andwireless in small, medium and GEM business within the SBCfootprint plus nationwide enterprise businesses. Source: Bain & Co.SBC’s immediatelarge business target –companies withmore than 50%of their locationsin footprint – represent 34 billion annualrevenue opportunity
Expanded CapabilitiesNetworkProductsSalesNational ATMand Framebackbone,IP networkBroad rangeof s d datacertificationsSinglecontracts,service levelagreements
Revenue TrendsSBC YOY(1)Revenue GrowthWireline YOYRevenue .4)%(6.6)% Two consecutivequarters withimproved YOYgrowth rates 4Q declinesless than halfyear-earlier levels(8.1)%4Q02 1Q03 2Q03 3Q03 4Q03Includes 60% of Cingular.Directory on an amortized basis.4Q02 1Q03 2Q03 3Q03 4Q03(1)14
Stable Cash FlowCash fromOperations(dollars in millions) 15,210CapitalExpenditures(dollars in millions)Free CashFlow BeforeDividends(1)(dollars in millions) 15,162 13,517 9,943 8,402 6,808 8,298 5,219200220032002200320022003Includes 1,645 million pension and retiree medical pre-funding.(1)Free cash flow is cash from operations less capital expenditures.15
Cash Returned To OwnersDebt Net of Cash& Short-termInvestmentsValue Returnedto Shareowners(dollars in millions)(dollars in millions) 5,012 25,461 haseRegularDividendsRegularDividends 18,473 12,755EOY ‘01EOY ‘02EOY ‘032002 Net debt cutin half overpast two years Quarterlydividendincrease of10.6% inDecember,total of 15.7%for the year200316
Cingular WirelessTransaction
Transaction Overview Industry-leading scale Broad market coverage Spectrum to accommodate growth andnext-generation services Sizable synergy opportunities and a proventrack record of execution to improve operations The financial strength to fund the transactionwhile maintaining strong credit profile18
Outstanding Strategic Fit Network Technology– Both networks GSM/GPRS– Used by 70% of world’s digital wireless market– Robust platform for emerging wireless data services Customer Base– Cingular has broad consumer base– AT&T Wireless has extensive business customer base, providingservice to 90% of Fortune 100, 70% of Fortune 500 Coverage– Strong national footprint– Spectrum to drive growth and support next-generation services19
Cingular TodayLicensed ciscoSacramentoSan JoseSalt LakeCityChicagoDenverKansas CitySt. LouisLas VegasOklahoma CityLos AngelesSan DiegoPhoenixBuffaloClevelandPittsburghDallasSan Antonio HoustonCincinnatiLouisvilleBostonNew YorkBaltimoreWashington, ntaBirminghamNew OrleansTampaJacksonvilleOrlandoWest Palm BeachMiami20
Cingular AT&T WirelessIncludes AT&T Wireless anciscoSacramentoSan JoseSalt LakeCityChicagoKansas CityDenverSt. LouisLas VegasOklahoma CityLos AngelesSan DiegoBuffaloClevelandPittsburghPhoenixDallasSan Antonio Houston 46 million subscribers 32 billion revenues in 2003CincinnatiLouisvilleBostonNew YorkBaltimoreWashington, ntaBirminghamNew OrleansTampaJacksonvilleOrlandoWest Palm BeachMiami21
Proven Ability to Execute:Integrating, Improving OperationsBilling Platforms Consolidated 11 separate operationsinto two scalable systemsCustomer Care Consolidated 60 separate call centersinto 20Distribution Replaced decentralized operations withsingle, state-of-the-art facilityPurchasing Significant savings from handset, networkand general services contractsBranding One of industry’s most successfulnew-brand launches22
Proven Ability to Execute:Reignited Subscriber GrowthCingular Wireless Net Adds(in thousands)2,116 High-quality subscriberswith nearly 90% of thebase post-paid3592002 Cingular’s best-evergross add totals in thethird and fourth quarter of2003200323
Proven Ability to Execute:Very Successful GSM ConversionPercent of CingularOperational POPs withGSM/GPRS CoveragePercent of SubscribersWith GSM-CapableHandsets93%45%81%35%66%56%27%22%57% of Cingular’sminutes on GSMnetwork in 4Q031Q032Q033Q034Q031Q032Q033Q034Q0324
SBC Impacts:Drives Revenue GrowthWireless as percent ofSBC 2003 total revenueson proportionate basis CingularSBC 2003 revenuegrowth rates ReportedWith60% ofCingularWith60% ofCingular AWE19%(2.1)%Cingular AWE(3.7)%32%(5.3)%25
Summary: Expected Financial Impacts Improves revenue mix, drives growth Impact on earnings expected to turnpositive in 2007 Modest financing requirements Will maintain very strong credit metrics,should have no impact on credit ratings26
SBC Investor UpdateMerrill Lynch Global CommunicationsInvestor ConferenceMarch 16, 2004Randall StephensonSenior Executive Vice Presidentand Chief Financial Officer
Comcast Cox Cable Time Warner BellSouth 304 270 245 365 377 SBC 3.5 Verizon 2.5 BellSouth 1.5 Comcast 5.3 Time Warner 3.3 Cox 2.0. 8 Growth In Consumer Bundles 19% 23% 31% Key Product Bundles customers with bundles including one or more key services - LD, DSL and wireless 36% . - AT&T Wireless has extensive business customer base .
