AT&T Inc. (T) Q4 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the AT&T Fourth Quarter 2011 Earnings Release. [Operator Instructions] As a reminder, today's call is being recorded. With that being said, I'll turn the conference now to Brooks McCorcle. Please go ahead.

Thanks, John. Good morning, everyone. Welcome to our fourth quarter conference call. It's really great to have you with us this morning. As John mentioned, this is Brooks McCorcle, Head of Investor Relations for AT&T, and on the call joining me this morning are Randall Stephenson, AT&T's Chairman and Chief Executive Officer; and John Stephens, AT&T's Chief Financial Officer. Randall will provide opening comments, then John will cover our results, and then we'll follow with Qs & As. Let me remind you that our earnings material is available in the Investor Relations page of the AT&T website. As a reminder, that is www.att.com/investor.relations. I also need to reference our Safe Harbor statement, which is on Slide 3, and that says that this presentation and comments may contain forward-looking statements. They're subject to risks, and details are in our SEC filings and on AT&T's website. With that, I will now turn the call over to AT&T's Chairman and Chief Executive Officer, Randall Stephenson. Randall?

Thanks, Brooks. Good morning, everybody. I'll start with just a couple of brief comments on 2011, then what I want to do is just move into our plans and outlook for 2012. And 2011 was obviously an eventful year not only for us but the entire industry, and what I hope didn't get lost in all the news cycles on mergers and iPhones is what AT&T accomplished during the course of the year and really how that positioned us for 2012. We came out of 2011 with each of our key growth platforms, mobile broadband, strategic business services and U-verse, all growing at strong double digits. That means better than 3/4 of our total revenues now come from wireless data and managed services and those have a combined growth rate above 7%. We had really strong mobile sales throughout the year. In fact, we had a blowout holiday season. And in the fourth quarter, we sold 9.4 million smartphones, that's 50% above our previous record. In the year, when our competitors began selling the iPhone, we outsold them in every single quarter. We also led all competitors in total wireless subs added, 7.7 million for the year. And we're #1 in just about every key mobile broadband growth metric: smartphones, emerging devices, postpaid data ARPU and customers on tiered pricing plans. And when you look at the network side of the equation, this was, for us, an unprecedented year. We challenged our network team to push call retainability on our 3G network above 99% by year end, and we've now hit or beat that 3 months running. We closed the year with 80% of our total mobile data traffic on Ethernet backhaul. That's well ahead of our original plan. And we're pleased to have that deployment behind us because we…

Thank you, Randall, and good morning, everyone. Let me begin by providing consolidated financial summary, which is on Slide 6. 2011 was a story of record mobile broadband sales and solid revenue gains. Revenues were up 2% for the year and 3.6% in the fourth quarter alone. Stronger-than-expected smartphone sales also impacted earnings and margins. In the fourth quarter, we reported earnings per share of a negative $1.12. Excluding $1.54 of mainly noncash onetime items, earnings per share for the fourth quarter was $0.42. Onetime items included $0.65 of noncash pressure from the year-end mark-to-market change for our benefit plans. The actuarial loss on benefit plans was driven by a reduction in the discount rate from 5.8% to 5.3%. While our investment returns were better than the overall market, they were less than our expectations but that was largely offset by better-than-expected force retention and medical cost management. $0.48 of the noncash pressure is due to asset impairments in our yellow page and directory operations. This was part of an annual review in tangible assets, comparing them to fair market values of similarly situated companies. $0.44 of pressure is due to the previously-announced termination of the T-Mobile USA transaction, and we have $0.03 of help from a tax settlement. Cash flow continues to be strong: $2 billion in the quarter and $14.4 billion for the year. And when you adjust out the onetime contract termination payment, it was outstanding. Looking ahead to 2012, we expect earnings to grow in the mid-single digits or better for the year. Now let's look at revenue growth and how our growth drivers are transforming our revenue mix. Details are on Slide 7. Fourth quarter consolidated revenues totaled $32.5 billion, up 3.6%. For the year, consolidated revenues grew by almost $2.5 billion. The growth drivers…

Okay, great. Thank you, John. Okay, John, I think we're ready to open up for questions.

[Operator Instructions] And first, we'll go to Simon Flannery with Morgan Stanley.

Randall, I think one of the things you were hoping to get from T-Mobile was a better prepaid platform. Prepaid's about 2/3, 70% of the new subscribers coming on. Can you talk about how prepaid will fit into your strategy, given what Verizon and some others have done here recently for 2012? And perhaps, you could expound a little bit more on your comments about looking at underperforming assets. Might we see spinoffs of rural lines and sales of directories, is that the sort of thing we should be thinking about?

On the prepaid platform, we've been rather transparent about the prepaid area in terms of when you're spectrum-constrained, you get really focused on the markets you want to pursue. And we have obviously been very, very focused on the high end of the market. And the beauty of T-Mobile was it not only came with spectrum, which would allow for some efficiencies, but then a prepaid platform that allowed you to move down market. As we're getting more and more of a better performance out of our network and as we move to LTE and begin to free up some of the 3G spectrum, this is probably an area that we'll look to for growth, Simon. In fact, we have a lot of work going on in this right now. I wouldn't expect or I wouldn't have you expect to see that in the next 6 months, but when you look at the next 12 to 24 months, prepaid will obviously become a focus for us especially when you think in terms of mobile data because, mobile data, that's probably an underserved area where that segment of the market does not have a robust data offering in a prepaid environment. So that will be a focus as we begin to mine out some capacity as we move to LTE. In terms of the underperforming assets, you hit a couple of areas. Obviously, we just took a rather large charge in our directory operations to reflect a lot of the current comparable pricing in the market for those types of assets. That's one area that we're going to obviously take a very hard look at. And while I don't want to give any indication of M&A activity, it's one of these areas where we're going to have to decide: Do we…

Our next question is from John Hodulik with UBS.

Randall, maybe picking up on the spectrum issue, maybe a little bit more detail, if you could, on your spectrum needs. I mean, obviously, you have some runway with the new 4G network, but you said you'd be more aggressive in that area or then, say, in 2012. I mean, what kind of opportunities are out there? I mean, is it more private companies like Aloha or even potentially other larger companies out there that are operating businesses that have spectrum that you guys could look at? If you could just characterize the sort of environment for new spectrum that already exists. And then maybe talk a little bit about, from a frequency standpoint, I mean, obviously, for you guys, the lower the better, but where would you look at spectrum? Basically trying to get a sense for how badly and how soon you're going to need new spectrum.

Yes, okay, John, what I'd tell you is the immediate time frame. In terms of through our LTE deployment through 2013, I feel really good about where we are. We've got sufficient spectrum to get us through LTE deployment. And then, as you to begin to transition off your 3G networks to LTE, it'll buy you some more time in using data [ph] solutions and Wi-Fi solutions. But when you kind of look out and span the horizon or scan the horizon, there are no secrets. Everybody knows where the spectrum resides and who is holding it. Our biggest issue isn't identifying it and pursuing it. Our biggest issue is understanding what we're allowed to do. And we're literally sitting here in a situation where we don't know how much spectrum we're allowed to hold, who we're allowed to do business with and so forth. That was the basis of my comments in the opening session. We've just gone through a process where we tried to get a transaction approved and the FCC came out with a report and said that we exceeded the spectrum caps in over 200 markets. You can imagine how surprised we were to read that until you've read deeper into the report and realized they had changed the spectrum screens. It might have been nice to have known they were going to change those spectrum screens ahead of time, but that is what it is. Then literally, a couple of weeks later, they approve our acquisition of the Qualcomm spectrum, and in reading the report, they evaluated it using the old spectrum caps. So we're literally sitting here in a situation where we don't know what spectrum caps are going to apply from one transaction to the next. So our first issue is not identifying which spectrum we go after but identifying what the rules are. How will these transactions be evaluated? Who are we allowed to do business with and who are we not allowed to do business with? In terms of the frequencies that we're interested in, it's no surprise. We tend to favor the lower band, the 700-megahertz spectrum. We have a very, very good position in that particular location so we obviously have a lot of interest in the spectrum that resides down there. We've done a number of transactions in that particular area since the auctions occurred in 2007, so that's obviously an important area for us. AWS is obviously a good area for us to operate. We've launched our LTE network in the Chicago area on the AWS spectrum, that frequency, and it's performing quite nicely. So those would obviously be the priorities, but again, that's, the who and the what is not the question. It's what can we do and what are we allowed to do, it's the real question for us right now.

Our next question is from Michael Rollins with Citi Investment Research.

First on the wireless side, you've talked about the improvements in network quality but also that the network is running hot. Can you talk about the opportunities that you have to continue to manage the high quality of service to the broad base of HSPA+ customers and what the implications are for CapEx? And then secondly, a little bit more on the business side. If you could just give maybe an expansion of comments in terms of what you're seeing on strategic revenue growth and what's been driving the strong growth there. And also maybe what you're seeing on the legacy service guide, maybe some slowing in the rate of revenue erosion there?

Sure, Michael. On the network quality side, wireless network quality, with T-Mobile behind us, we're back to blocking and tackling, if you will, and that means reinitiating significant sales splits. So we had a sales split strategy that was on hold till we got to the T-Mobile transition. So we're back to doing sales splits. We continue to go very, very aggressively on distributing the antenna system solutions and so going inside of buildings and lighting up buildings from the inside, Wi-Fi solutions, all of these, we just continue. And there's no new science here per se. Obviously, additional spectrum, where we can pick it up, is another part of the equation so you'll continue to see us be aggressive there. We have, I think we had some transactions approved by the FCC last week, but before last week, we had 8 transactions sitting in front of the FCC waiting for approval so we can begin investing. So you'll just continue to see us do a lot of the typical blocking and tackling. And you'll also see us, in markets where we've launched LTE, be very aggressive in migrating customers to the LTE platform. And if you're buying today an Android smartphone by -- from AT&T, you're probably buying an LTE-equipped handset, so as we turn up LTE in any of these markets, you're just inherently on the LTE network. So that obviously facilitates getting us the capacity relief that we need, as well. So it's going to be a number of initiatives. In terms of the business services side, what's driving it, again, there's no big secrecy here. VPNs are a huge part of this. Our business customers are moving aggressively to VPN solutions and we continue to run mid-teen type growth rates on VPN. The other is Ethernet,…

Our next question is from Mike McCormack with Nomura Securities.

Randall, I guess, just thinking back about the introduction of the iPhone. And obviously, a lot has happened since then, but clearly, there was an expectation for an improvement and the approving of an NPV positive story. But maybe just help us with what the headwinds have been there because, if you look back over the past couple of years on churn metrics, ARPU growth rates and margins we're just, it just doesn't seem like we're getting the benefits of either iPhone or smartphone penetration. Can you just walk us -- I think voice is obviously an issue there, but any other headwinds that you think that you can address as we go forward? And then John, just thinking about the EPS guide, have you included a thought process on iPhone refresh?

I guess what I would suggest is, while we've had margin pressures as we've gone deeper and deeper into the smartphone category, they continue to be high-NPV product categories. And in fact, the ARPUs are significantly higher than traditional mobile-phone-type capabilities. And to think that we're getting to 57% penetration of our smartphone base -- or of our postpaid base, excuse me, with smartphones and keeping margins in that 40% range, to penetrate that deeply and keep margins at this 40% range, I actually think is better than I might have hoped for. I -- it was a while before we had expectations that 80% of our sales would be in smartphone categories. But to sell 80% of all of your sales being smartphones and keep margins in this 40% range for the year, I, actually I'm not too disappointed with that. And I think it's going to prove to be a terrific platform for us because here's what we're seeing, Mike, and that is, you get a customer on smartphone and then you get a customer with FamilyTalk plans or family plans on smartphones and the smartphone becomes the platform for the new services that we're now selling. Somebody buys a tablet and puts their tablet on a 3G or 4G network. That customer puts that device on the same network as their smartphone. So we think it's going to prove to be a very important platform as we move forward. That's why we're not shying away from continuing to pursue this market. We have done some things where we've tightened up the upgrade policy to try to begin to manage the cost of the upgrades in this particular base. But all things considered, I'm pleased with the smartphone category and we'll continue to do things to tighten up margins as we go forward. We also took some actions during the course of this year that had an effect on our ARPU, and we believe it's going to prove to be a temporary effect on our ARPU, and that is, with 2011 being the year when we first had competition for the iPhone, we made some strategic moves. We introduced unlimited mobile-to-mobile calling if you had an unlimited text plan. That proved to be a very sticky move from a pricing standpoint, but it's had a negative effect on ARPU over a couple of quarters. We're seeing that stabilize now. We don't expect to continue to see that dilution on ARPU as we move forward, but that did have an effect this year that we think is largely behind us, and as we move to 2012, it should not continue to suppress ARPUs. But all in, it continue to be a bull, a big-time bull in the smartphone category and iPhones in general.

And just a, I'm sorry, Randall, just as a quick follow-up on that. You identified part of the voice pressure there, but are you seeing, obviously, upgrades are running pretty high across the entire industry, but are you seeing the people coming to the store for the upgrade to the smartphone, making decisions on how many voice minutes they want? Because it seems like, and I mean, I got a couple of younger kids, but they just don't talk on the phone anymore. So are we seeing sort of the pricing down to these lower buckets?

Without a doubt. And well, you're seeing it from the phenomenon you just described, and that is, young people, it's almost uncool to talk on a phone, right? I mean texting and messaging are keys. But, and so that has had its effect. But also, when we did go to mobile-to-mobile calling, this will tell you how efficient these markets are, but people began to immediately, particularly in small business, small businesses immediately rightsized their plans to reflect the mobile-to-mobile calling feature. And so we did see a step-down very quickly, but as I mentioned, we're beginning to see that mitigate.

Mike, with regard to your question with regard to the 2012 expectations, 2 points on smartphone sales with an iPhone refresh: We do have smartphone sales flat compared to '11 in our expectations and that is in a 25-million-unit level, which is a record for us. So we did assume that we would have that same level again, and that's after we've fully implemented during this year our new handset upgrade policy so that also takes into account some growth opportunities.

Our next question is from Phil Cusick with JPMorgan.

First is just a follow-up on what you just said, John. So that's a flat from the fourth quarter smartphone run rate, right?

I'm sorry. We're going to -- we -- the annual run rate for the smartphones in 2011 was $25 million and we have plans that assume we're going to stay at that level for the year in 2012. It just may be mixed differently by quarter. That, in my opinion, is a significant number particularly since we'll have the new upgrade policy fully implemented this year.

Got it. So you would expect the upgrades to moderate somewhat in '12?

Yes.

Okay. So a bigger question: Can you talk about the wireline business a little bit? It just sounds like you said it'll turn positive in 2012. Does that mean sort of positive for the year, or at some point, maybe during the back half, it switches to positive? And then talk about margins there. So flat year-over-year, is there any potential for additional cost cuts? Or is that really sort of mix shift still and there's not much to be done with that level?

So I directly expect revenue to grow for the entire year, for the overall. Whether it occurs fully in the first quarter or it occurs later, it will occur for the full year. We expect revenues to grow. Secondly, there are additional cost opportunities and savings opportunities. We've gone a tremendous distance in getting our One AT&T initiatives and other cost efficiencies in place, but there's always, as one of my peers would say, there's always more, and we're going to continue to work for that more. We do have a headwind of continued legacy product challenges, and so those cost savings may go to offset that. And finally, as we've mentioned here previously, we're not assuming a significant lift, a measurable lift at all from the economy. And as such, if we had that lift, there would be an opportunity to perform better than what we've expected.

Our next question is from Jonathan Chaplin with Crédit Suisse.

A couple of quick questions for John. So firstly, on the share repurchase, is there any impact of share repurchase that's included in your EPS guidance, and if so, how much does that contribute? And I'm wondering if you can just talk a little bit about how you sort of manage between wanting to take as many shares out as quickly as possible early in the year versus maintaining that 1.5x debt-to-EBITDA ratio. Can you go significantly above that and maybe implement something like an accelerated share repurchase program early in the year and then trend back down to that over the course of the year? And then, sorry, one final question: On the impact of the upgrade policy change, can you just run through when you think that impact will start showing up? And how much you think the upgrade rate could come down in 2012 over 2011?

So Jonathan, let me to try to take them in short order. First of all, with regard to the assumptions we made in the plan with regard to share repurchase, I would suggest to you, my guidance, our guidance for the year wouldn't be any different based on moving that share repurchase assumptions around. It wouldn't have changed -- it did not change the guidance we're giving you, so if we had no share repurchase, we'd stay with that mid-single-digits EPS growth. That's the first question, I hope that's responsive. The second question, with regard to our debt ratios, I think you need to understand, and I know you do, Jonathan, but I think you need to step back and look at our balance sheet today, with over $3 billion in cash on our balance sheet. Look at the cash flows that we are expecting to generate, over -- close to $6 billion over our dividend requirements. That total of $9 billion gives you a good insight into how much shares we can repurchase or can give you one insight into how much shares we can repurchase without affecting debt metrics. And so we'll be prudent. We are sticking to our standards with regard to the 1.5x and in the debt-to-equity kind of guidelines we've given. But we have cash generation. A company like ours has significant flexibility in the timing of those kinds of activities. The upgrade policy, I would expect it to go in full force at the end of the second quarter. We've put it in place in the first quarter of a year ago and it takes about a 1.5 years to be fully implemented. You probably won't see the full effects of it until the second half of this year. That's our expectations. I will tell you that, in this first year, we are expecting to see some improvement, but we have not given, and I don't believe we are giving guidance on the specific impact on upgrades. Anything else?

And next, we'll go to Jason Armstrong with Goldman Sachs.

Randall, maybe just a quick follow-up on the regulatory environment. What, in your mind, is the path to more clarity out of D.C.? What would you need to see from them? Or are we just to assume that you effectively need a complete reset at the FCC to contemplate anything else of size that you'd take to them? And then maybe just a quick follow-up on the upgrade percentage. Obviously, such a big swing factor for wireless margins. The industry seems to go through waves of tightening and loosening upgrade policies. Your latest move, obviously very constructive and tightening, but maybe you can talk bigger picture and longer term, can we as an industry get into a sustained period of tightening that would really reflect sort of a greater degree of discipline?

Okay. In terms of the regulatory environment, Jason, I would tell you there is one thing that could be done in very, very short order that would kind of lift the veil or cloud of uncertainty surrounding a lot of this, and that is, Congress passes legislation initiating the auctions and it's very prescriptive to the FCC in terms of what the FCC's role is in the auctions. And the House has a bill that is, has been drafted and it accomplishes exactly that. The FCC is obviously contesting that language. I think the chairman made a speech the week after the holidays, the chairman of the FCC, where he said he needed the rules to be fluid. My interpretation is these rules are so fluid you can drink out of them with a straw right now. So what we need from Congress is prescriptive legislation on how these auctions should be performed. And the language is presently in the current House bill. If that bill were to get passed, I think it starts to lift the veil of uncertainty surrounding the industry. In terms of upgrade policy, Jason, what you're articulating and discussing is the indication of an incredibly competitive environment in the mobility world. And I think what you're beginning to see is the smartphone market is maturing a bit, and as it matures, I think you'll begin to see different behavior among all the players. I probably can't go much further than that, but our -- as I've said at the very beginning, I feel like we have about as much visibility into the future as we have had in quite some time, so that intimates a certain degree of predictability that has not been there before. And we'll see. We've built our plans and our margin expectations around selling a comparable number of smartphones as we did in 2011, so 25 million. Will there be some new iconic device that nobody anticipated come out during the course of the year? Perhaps. But I do think 25 million sales is probably a reasonable expectation for us. And if we can get, if we do a 25 million sales level, then a 40% margin is probably an achievable level.

Jason, one thing, if I could add, Jason, one point I'd make is, as we go through this transition in our network and the ability to provide LTE, one aspect of this refresh process, as Randall mentioned, that doesn't get loss on is we really don't necessarily have to give much in the way of financial incentives to get our customers, as this was clearly shown in the fourth quarter, to get them to go to the latest technology. So we have an opportunity to shift dramatic levels of traffic to LTE. Also, as the industry all begins to fall into a similar situation with us with regard to wireline, wireless handset subsidies and cost and structure, we would hopefully expect that everyone would act rationally in the process.

Our next question is from David Barden with Bank of America Merrill Lynch.

I guess, just first, John, when you mentioned that you thought that wireless margins could be as high as 40% in 2012, were you meaning that you expect it to be able to maybe touch 40% at some point in time, or is that kind of more of a full year look? And then on the consumer revenues, for the last couple of quarters, it looks like they've been coming down sequentially. I know you've talked about some of the headwinds that you're facing with the legacy businesses and trying to restructure those, but is there a risk that consumer revenues might dip back down into negative territory and then get offset by some of the advances in business, as we look in the 2012 mix?

First of all, on the wireless margins, the expectations I mentioned, 40% were for the full year. We'll see how the different quarters go because of volumes and new handset issuances and so forth, but the comment was intended for the year. With regard to the consumer revenues, a couple of things I think I'd point out to you. We've got the U-verse build complete or essentially complete. And we'll continue to do a little bit more here and there, but we've passed 30 million homes so now we have a full 30-million-home capability to sell into so we have opportunities to continue that growth. I think we mentioned that there was 16% penetration in our eligible living units, and in those that are longer than 36 months, we're more like 25%. The other piece of that is we're having tremendous results with our high-speed U-verse-type broadband, not only in consumer but in small business. And so those opportunity to sell into more U-verse markets and that continued push on high-speed Internet and attach rates for VoIP give me optimism over continuing to have a good performance in consumer. With that being said, we are expecting even better performance in business. And they've proven it, they've shown it. The strategic services give us factual support for that thought process.

If I could just follow up real quick, Randall, just one quick one for you. If we could just get your kind of take on the Verizon agreement with the cable companies, their cross-marketing agreement now kind of anticipating potential Verizon selling of cable products in your territory. How do you look at that transaction? Are you, would you support it at the FCC? How do you think about it competitively? What does it make you want to do to respond? That'd be very helpful.

Yes, as it relates to them selling cable products, it's interesting. It was obviously, their footprints don't overlap so much and so I don't know. I think it'll be interesting to see how the FCC deals with it. It appears to me to be a logical transaction. I obviously will be watching very closely because, again, it's, hopefully it's one more data point on what the spectrum screens really are, which if it does nothing, it should give us some clarity on what we're able to do as we move forward. So we won't be a participant in terms of comments or anything on this, just watching as a very interested bystander, hopefully getting some indication on what it means for us in terms of what we're able to do.

Okay, John, I think we have time for one more question.

And that will be from the line of Craig Moffett with Sanford Bernstein.

I wonder if you can just help me, Randall, with the growth outlook. If I'm doing the math right, it looks like service revenue growth in the wireless business, excluding the hardware sales, has now actually dropped to about 4%, and as you said, the smartphone penetration is now at about 57%. How do I think about kind of re-accelerating growth in that business? Where does it come from since the incremental data penetration rates and the growth rates are starting to subside a bit?

Yes, so 57% smartphone penetration. As we said, sales, smartphones represented 80% of our sales. So every time we peg what the penetration rate will get to, it seems like the percentage of sales moves up another notch. And so we think we still have quite a ways to run in terms of smartphone penetration and you continue, we'll continue to see ARPU lift as we penetrate smartphones more and more into the base. Also, I believe that what you're seeing right now, 1.4% postpaid ARPU growth, I believe you'll see that accelerate next year as we work through some of our unlimited mobile-to-mobile calling price changes. So we think we'll see some ARPU lift in terms of the growth rate, going into next year, so that will be very important. And then again, as I mentioned, I'm absolutely convinced the smartphone is a platform. And the customer that you hold with the smartphone is the customer that you will sell the tablet, is the customer that you will sell connected devices, is the customer you will sell home monitoring capabilities. We -- I just really believe that it's becoming more and more a factor in terms of, or a platform in terms of further penetration in mobile data and that's why we're going so aggressively on LTE. And then we haven't really begun to broach business mobility and business mobility in terms of applications. I think we're very early in the cycle in terms of businesses mobilizing all aspects of what they do, whether it be sales force automation or imaging, and there's just so many applications that businesses are just starting to get their hands around that will become a significant driver of growth. So I'm feeling pretty good that we have a long way to run in terms of growth in the mobile broadband infrastructure. You're seeing us invest heavily. We'll continue to invest, again, getting to LTE 80% coverage by 2013 and we just think it's going to be a terrific opportunity. So with that, I, we're going to close. And I want to thank everybody for taking part. As I said, 2012, we've probably got the best visibility we've had in quite some time. Our growth engines are on track. It is being led, as you heard by our comments and your questions on this call, by mobile broadband. The key for us is spectrum. We need the FCC and Congress to get us, to open up and get us to a point of open auctions, and that needs to be done as soon as possible. We're committed to making sure that AT&T is structured for growth. We're going to look at low-growth and nonstrategic assets and make some decisions over the next few months. And given this environment, we'll begin significant share repurchases and we'll do that immediately. So we're looking forward to a good 2012. Thank you, again, for joining us, and we'll talk you later. Thank you.

Thanks, everybody. Have a great day. Thanks, John.

You're welcome. And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T's Executive TeleConference Service. You may now disconnect.