Cingular 3rd Quarter 2006 Results

[Barry]

Cingular Wireless reported record-setting net income of $847 million for the third quarter, which is a year-over-year increase of over 280 percent. Cingluar also achieved a year-over-year increase in ARPU, normalized OIBDA margins that were the best since 2001, and the completion of its GSM network integration.

Cingular's normalized OIBDA margin* was 35.6 percent in the third quarter, which is an improvement of 400 basis points compared to normalized year-ago results and a sequential improvement of 300 basis points.

For the quarter, Cingular reported postpaid churn of 1.5 percent, equal to the company's best-ever results. This is a year-over-year improvement of 50 basis points and flat compared to the second quarter of 2006.
Overall monthly subscriber churn was 1.8 percent, which represents a year- over-year improvement of 50 basis points and a sequential increase of 10 basis points. The sequential increase resulted from normal seasonality patterns, the sunsetting of AT&T Wireless' prepaid plans, and from certain actions the company took to recover increased costs associated with serving the rapidly diminishing base of its TDMA customers.
Cingular's net additions were driven by lower churn and strong gross customer additions. The company reported 1.4 million net adds. Cingular's performance in net adds compares to 867,000 in the year-ago quarter and to 1.5 million in the second quarter of 2006. Some 928,000 of the 1.4 million net adds were postpaid customers, marking the company's third consecutive quarter of postpaid net adds nearly at or above the 900,000 level.

In addition, retail customers represented 87 percent of net adds in the third quarter, which compares to 74 percent in the year-ago quarter and to 75 percent in the second quarter of 2006. Reseller customer net additions were 174,000, which is down from 228,000 in the year-ago quarter and from 380,000 in the second quarter of 2006.
Gross additions were 4.6 million, which compares to 4.4 million in the year-ago third quarter and to 4.4 million in the second quarter of 2006.

Cingular ended the third quarter of 2006 with 58.7 million cellular/PCS subscribers, tops among U.S. carriers and a year-over-year increase of 6.4 million. Data ARPU was $6.32, up 46 percent over the year-ago third quarter and up 10 percent sequentially.
In addition, the company's Business Markets Group signed more than 1,000 new and renewed high-end service contracts in the quarter.

During the third quarter of 2006, 99 percent of minutes were carried on Cingular's GSM/UMTS/HSDPA network and 94 percent of the company's subscriber base was GSM/UMTS/HSDPA-equipped.

Financial Results

- In the third quarter of 2006, Cingular's total revenues were $9.6
billion, up 9.2 percent over revenues for the year-ago quarter and 3.6
percent compared to the second quarter of 2006. Service revenues,
which exclude revenues from sales of handsets and accessories, were
$8.7 billion, which is a year-over-year increase of 12.2 percent and a
sequential improvement of 4.4 percent.

- ARPU increased to $49.76. This compares to $49.65 in the year-ago
quarter and to $48.84 in the second quarter of 2006. Continued growth
in data ARPU contributed to this increase in overall ARPU.

- ARPU from data services continued to grow robustly, increasing by 46
percent to $6.32 year-over-year and 10 percent sequentially. This
growth was spurred by the increasing popularity of downloadable games,
ringtones, mobile instant messaging, mobile email, photo messaging, and
media bundles. In addition, text messaging continued to grow. In the
third quarter of 2006, Cingular had 28 million active data customers,
and delivered 138 million multi-media messages and 10 billion text
messages.

- Reported operating expenses were $8.1 billion, which included $87
million in OIBDA-affecting merger integration costs and $52 million
non-cash merger integration costs, for a total of $139 million.
Operating expenses also included $314 million in non-cash amortization
of intangibles as part of the merger with AT&T Wireless.

- Reported OIBDA margin was 34.5 percent. Normalized OIBDA margin of
35.6 percent was the highest margin the company has posted since 2001.
This is an improvement of 400 basis points compared to the year-ago
quarter and 300 basis points compared to the second quarter of 2006.

- Reported operating income was $1.4 billion, which compares to $657
million in the year-ago quarter and to $1.0 billion in the second
quarter of 2006. Normalized operating income was $1.9 billion, which
compares to $1.4 billion in the year-ago quarter and to $1.5 billion in
the second quarter of 2006.

- Reported net income was $847 million, which compares to $222 million in
the year-ago quarter and to $540 million in the second quarter of 2006.
Normalized net income was $1.2 billion, which compares to $835 million
in the year-ago quarter and to $956 million in the second quarter of
2006.

- Capital expenditures were $1.8 billion. These were driven by, among
other developments: continued progress in merger integration; ongoing,
rapidly accelerating improvements in network coverage and quality; and
the continued introduction of Cingular's powerful UMTS/HSDPA 3G
technology in markets around the country.

Third-quarter highlights and initiatives

- Cingular completed its GSM network integration, which began shortly
after the company's merger with AT&T Wireless in October of 2004. With
access to 45,000 cell sites around the country, customers are
experiencing dramatically improved coverage and call quality, including
the fewest dropped calls.

- The company continues its aggressive deployment of 3G UMTS/HSDPA
network throughout the country. The 3G service, which offers mobile
wireless broadband connections averaging 400-700 kilobits per second,
is available in 115 cities (with populations of 100 thousand or more)
in and around 52 major markets in 28 states and the District of
Columbia. Customers can use the 3G connections to access e-mail and
information services or watch streaming video clips using Cingular
Video.

- Cingular launched the LG CU500, a feature-packed device based on HSDPA
technology, allowing customers to realize the full potential and
benefits of Cingular's high-speed 3G network. The CU500 easily
addresses customers' voice, data, messaging and music needs.

- In its continuing effort to raise the bar in mobile music, Cingular
introduced its third phone with iTunes -- the MOTORAZR v3i. The
MOTORAZR v3i is the latest addition to the award-winning RAZR family of
products, offering Cingular customers the ultimate in design and
entertainment. To date, Cingular remains the first and only U.S.
carrier to offer phones with iTunes.

- Cingular also signed more than 1,000 new and renewed high-end service
contracts during the third quarter of 2006. These included business
and government accounts such as Assurant, Banta Corporation, Brooke
Corporation, BusRadio, Commonwealth of Kentucky, J.R. Simplot Company,
Nokia, St. Paul Travelers, Southwest Airlines, Southwest Freight Lines,
STERIS Corporation, Unilever, the U.S. Army/U.S. Air Force, U.S. Marine
Corps Recruiting Command, VHA Inc., Valspar Corporation, Weyerhaeuser,
and XOJET.

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