Ladies and gentlemen thank you standing by. And welcome to the AT&T Third Quarter Earnings Release 2014 Conference Call. At this time all participants are in a listen-only, later we will conduct a question-and-answer session and instructions will be given at that time (Operator Instructions).And at this time I will turn the conference call over to your host, Senior Vice President of Investor Relations for AT&T Mr. Michael Viola. Please go ahead sir.

Thank you, Tony and good afternoon everyone. Welcome to our third quarter conference call. It’s great to have you with us today. I’m Mike Viola, Head of Investor Relations for AT&T. Joining me on the call today is John Stephens, AT&T’s Chief Financial Officer. John will provide an update with the perspective on the quarter and then we’ll follow that with a Q&A session. Let me remind you our earnings material is available on the Investor Relations page of the AT&T website and that’s www.att.com/investor.relations. I first need to draw your attention to our Safe Harbor statement before we begin which says that some of our comments today maybe forward-looking. As such they are subject to risks and uncertainties, results may differ materially. And additional information is available on the investor relations page of AT&T’s website. I also want to remind you that we are in the quite period for FCC Spectrum Auction 97 and AWS-3 Auction so we cannot address any questions about Spectrum today. So with that overview, I now turn the call over to AT&Ts Chief Financial Officer, John Stephens, John?

Thank you, Mike. And hello everyone. Thank you for joining us today and we always appreciate your interest in AT&T. Before we report out on our quarterly results, I’d like to update you on Project VIP in the longer term view of our business transformation. We’ve been focused on building ultra fast, video centric networks and providing mobile connectivity to any device, anywhere our customers needed. I am pleased to say we have made great progress. It’s been nearly two years since we first announced our VIP initiatives and our plans to transition to IP networks. Basically, we are doing everything we said we are going to do and more. We reached our 4G LTE build target in the third quarter four months ahead of schedule. The nation’s most reliable LTE network now covers more than 300 million people. We continue to improve our self identity and add capacity to help keep our network best-in-class. We are also on pace with our wireline network goals. Our high-speed IT broadband network now reaches 57 million customer locations. About two thirds of our U-verse video footprint now has access to 45 megabit per second speeds. We also continue to make progress on expanding our U-verse video footprint and we committed to deploy ultra fast AT&T GigaPower service in 17 markets. Our fiber to the business expansion also is going strong. We now pass more than 600,000 new business customer locations with fiber, well on our way to our one million goal. The transformation of our customer base also continued in the quarter. Two years ago when we first introduced Project VIP less than half of our broadband customers had high speed IP broadband. Now a significant part of that transition is complete with nearly three quarters of our base on high speed…

Thank you very much. (Operator Instructions) The first will come from Mike McCormack with Jefferies. Please go ahead. Mike McCormack – Jefferies: Hey, guys. Thanks. John, you have made a lot of protective moves this year, obviously, and we’re seeing phone-only ARPU stabilizing, but EBITDA has gone ex-growth. I guess just trying to think into 4Q, I'm assuming that the expectation clearly without subsidies is to see a decent number in year-over-year growth and EBITDA. And then just, as part of that, if you could identify what you’re seeing out there with respect to recent data points from the iPhone with respect to sticker shock on this whole issue of people being concerned about layering EIP payments on top of the existing plan? Thanks.

Thanks Mike, I appreciate your question. Now first of all on the sticker shock issue itself, quite frankly with 90% plus of the people come into our stores, we’re not seeing – I won’t say we haven’t seen one or two, but we’re not seeing any strong number at all of sticker shock, and the reality of it is for a person to come in and go to a subsidized model, they’ve got to come up with $240 plus whatever taxes they have to pay. And if they stay on the Next model, they not only get the cheaper service on a monthly basis but the upfront costs are really only about $50. So, from a sticker shock it’s much more positive to go on Next than it is to come up with that down payment for the subsidized phone. So we – and we’re really aren’t seeing that at all. On expectations for the fourth quarter, won’t go into details, but as we’ve said before we expect a significant improvement in margins, EBITDA service margins in the fourth quarter compared to prior years and we are still working towards achieving what we said in the past and that is all four quarters this year to be 40% EBITDA service margins or better. Mike McCormack – Jefferies: Okay. Thanks John.

Thank you.

Thank you. Our next question in queue will come from John Hodulik with UBS. Please go ahead. John Hodulik – UBS: Okay. Thanks. Good afternoon, guys.

Hey, John. John Hodulik – UBS: Hey. So my question is on the improvement on the ARPU side. John, could you just talk a little bit about what the drivers are of the sequential improvement we saw in phone ARPU and the improvement we saw in the postpaid ARPU? And then, as it relates to the pre-Next program, it looks like you went from 17 to 20 in the quarter to real slowdown. Have you guys repositioned the basis as much as you think is necessary or are we going to see that reaccelerate in the fourth quarter? Thanks.

Great. So, on the ARPU story, I think the biggest issue with the improvement is really the people buying the bigger buckets and buying – upping plans, as we’ve mentioned. We had over 50% of the customer base at the 10-gig or bigger plans. We believe that that is really helping on the ARPU side. We still have – we still expect more customers to migrate to the Mobile Share Value plans, so we may still see some more pressure from the existing customers on that ARPU side, but buying the bigger bucket is definitely helping. Secondly, on the Next take rates, the two uniqueness of the quarter -- two items that are unique this quarter, were one, the significant BYOD and while those 400,000 plus BYOD devices really don’t bring us much if anything in the revenue and caused an adjustment in our thoughts on revenue they don’t bring any expense either. And so we’ll take those every time we can get them. That seemed to have an impact on the Next take rate. The other issue is where inventory was available in the launch month, which was September where customers have a much higher experience, better experience going to Next in a company owned stores. But in the launch cycle sometimes inventory was constrained, so people would go into different locations where our experience level in Next hasn’t been as high, particularly in some of the new channels like some of the big-box stores or some of the manufacturer stores. So, we’d expect that to get to those higher levels over time, so we do expect the rate to increase. It’s just going to take a little longer time than we had expected. John Hodulik – UBS: All right. Thanks

Thanks.

Thank you. Our next question in queue will come from Joe Mastrogiovanni with Credit Suisse. Please go ahead. Joe Mastrogiovanni – Credit Suisse: Thanks for taking my question. John, I just wanted to clarify the postpaid net add estimate did not include internal migrations from prepaid. And then, to what extent did you see prepaid migrations to postpaid may be coming from your peers and have you made any changes to your credit standards?

So a couple of things, we haven’t made a changes to our credit standards in any way shape or performance that will be significant or any change, that would change any traffic. Secondly, we do not count any migrations from for example our Cricket product into our AT&T product. Those will be excluded not only for phones but for tablets, that’s how we count or have ever counted that information. I can’t comment necessarily give you lot of significant information with regard to any change in the migration from the customers that are porting into us whether they were previously prepaid or postpaid customer of the other carriers. I can’t – I don’t – and what I mean to mean to say by that is, I can’t – I don’t want to indicate that there’s any significant change in that. I am not aware of that, so I’ll leave it at that. Joe Mastrogiovanni – Credit Suisse: Got it. Thanks.

Thank you. Our next question in queue will from come from Simon Flannery with Morgan Stanley. Please go ahead. Simon Flannery – Morgan Stanley: Thank a lot. Good evening. John, are you still committed to the $21 billion capital spending guidance? [You imply just] [ph] a $4 billion number for the fourth quarter. And how are we thinking about that for -- is $21 billion still a good number for 2015 under VIP? And then on wireline margins, you talked about some of the content costs, some of the transformation costs. When do we see those margins start to stabilize? Thanks.

Simon, we are still committed to the $21 billion [range] [ph] for 2014 which is the guidance we’ve been giving, so that gives us some room possibly 21.5 down and $20.5 somewhere in that, so that’s I would suggest is a range, but yes we’re still committed to that. Yes, we expect that to be further step down to capital spending in the fourth quarter that was planned. If people are wondering how that might accomplished, I will tell you that if you look at what the network team has accomplished with regard to getting 300 million POPs with LTE coverage and getting 600 million business locations passed with fiber, getting 57 million customer locations passed with IP broadband capabilities. We are ahead of the game so to speak in what we laid out and so there’s a real opportunity to manage capital in that way and still continue to meet our target. It’s a benefit of being ahead of the game on some of the build. With regard to 2015, I won’t give any additional guidance. I will specifically give - additional guidance we’ll give that in January and update our guidance like we normally do. I will suggest you this though, we still expect tax extenders to get passed in the post-election session of Congress and those to get signed. If that doesn’t get signed, I would suggest you the companies, all companies, will have to take into account that change in their ability to invest because it’s a financial change in their balance sheet and their cash flow statement. And that would be for us it would definitely be taken into account and what we decide on our investments next year. But quite frankly, I think many companies it would have an immediate impact if it’s not…

Thank you, Simon.

Our next question in queue will come from Brett Feldman with Goldman Sachs. Please go ahead.

. Thanks a lot. Just a follow-up here. You talk about an expectation that your Next take rate is likely to increase into the fourth quarter, after kind of stabilizing in 3Q. I just want to clarify, is that because you are putting more emphasis on that in the channel or are you seeing something else that’s driving it? And then just in terms of other sort of margin drivers into the fourth quarter, can you give us some thoughts on where you think we're going to see the upgrade rate come out?

Yes. Brett, let me give you the simplest answer I can with regard to the Next rate improving. Our stores in September had some shortages on inventory where customers went -- our customers went and bought inventory from channels. Our stores our company-owned stores have the highest performance of Next take rate. So now that those inventory constraints we’re expecting to get behind us. They’re not quite there yet, but we expect them to get behind us, we’ll back to more normal sharing of that. That’s the first reason. Second reason is, as we rolled up in Next program in the manufacturer stores and in the national retailer stores, there’s learning curve and we are going through that and as we go through the learning curve the Next take rate of those operation has been improving. Those are the two reasons why we think that the overall take rate can improve. Any time we have a launch of a new device in a month, it challenges a lot of pieces of your operations. In this case it challenged our Next take rates. With regard to margin activities, we’re going to have the -- we continue to have the focus on expense management across the enterprise, but I think you probably know that with regard to percentages on upgrade rates we’re not going to give any guidance on that and I wouldn’t suggest there would be any differences one way or the other they need to have in a fourth quarter holiday season with a new product launch out there.

Great. Thanks for taking my questions.

Sure.

Thank you. Our next question will come from Phil Cusick with JPMorgan. Please go ahead. Phil Cusick – JPMorgan: Hey, guys, thanks. I guess a couple of housekeeping things. One, can you reiterate or not the $11 billion in free cash flow and your EPS guidance that you'd given earlier in the year? And then, second, just following up on Brett's question on the Next mix, given the -- what I think is a tougher credit requirement and the limits on distribution, how big of a mix on gross adds could this be, do you think? Is there an upper limit around 75 or 80 that this doesn't go above? Thanks

So, Phil, we’re not changing guidance with regard to EPS or free cash flow. We’re still in that $1 billion range. We’re still – I think what I said before is the low end of the mid single-digit EPS range. The only caveat I give to that is if we continue to have quarters where we add 2 million customer, we’re not going to turn down the opportunity of 2 million postpaid customers or the kind of wireline growth we’ve had in a strategic services, we’re not going to turn that down just to make a goal that the finance guys may have set. We’re going to do what’s right for the business, but sticking by what we said before. With regard to the Next take rates, I think you hit on the right point in the sense of there is always going to be credit scoring impact on the availability or the qualification of our customers. So there always be some customers who would be better suited of our other arrangements or another products. We welcome them. We love to have them. But we’re not likely to go with the Next program for them. Secondly and I think as importantly is customers just want to have choice and so we will look to make sure that they have a choice if they want to use the Next program. That’s fine. We’ll another opportunity for them. With that being said, we certainly expect that with this Mobile Share Value pricing going to two-thirds of our base by the end of the year that there is significantly step up in the number of Next customers compared to what we have today. Whether that all occurs in the fourth quarter or some of that occurs in 2015, we’ll have to wait and see, but either way it still a good long-term investment for us and we believe a good long-term situation for our customers. Phil Cusick – JPMorgan: Got it. Thanks, John.

Thank you, Phil.

Thank you. Our next question will come from Jennifer Fritzsche with Wells Fargo. Please go ahead.

Thank you for taking the question. John, I just wanted to explore the SMB. You realized some significant bucking of what I would think would be a different trend, just because all our checks show that the cable guys have been nothing short of aggressive. Can you talk a little bit of what you are seeing or what you're doing differently there to -- or is it just macro? Are you leading on wireless, et cetera?

Kind of all the above Jennifer, I am glad to the call. A couple of things, one, we’re putting a lot of fiber and a fiber whether you think about U-verse fiber and then U-verse fiber where many people think is consumer also can be available for business, but also the fiber that’s passing those business locations. We are finding that that fiber is enabling us to really go in and not only reinforce our customer position with existing customers but be very competitive in offering services to new customers. Talking about your strategic services piece in the small business is growing healthfully. It’s not a big base as of today, but it is growing well and the customer seems to like those services and are willing to take them. So the investments we’ve made in the IP are starting to pay off. Lastly, you hit the nail on the head and this is what we’ve done on an organization perspective. It works for small business as well large business, but the ability to be agnostic with regard to the services of whether it’s wired or wireless or more important the ability to combine wired and wireless services for you customers through one organization has proven to be really powerful even in small business. And so that’s how we think we’re bucking the trend of no business starts but we got a long way to go and we need to keep the team’s performing well but we need to keep it up and keep it moving forward, we are not making any declarations now but we do have a better feel for the situation than we did few quarters ago.

Great. Thank you.

Thank you. Our next question will come from David Barden with Bank of America. Please go ahead.

Hey thanks guys. I appreciate letting me ask some questions. So the first question would be on the enterprise side. Your biggest competitor talked about what sounded like were some structural things going on in the industry on private line pricing, core connectivity pricing, and it doesn't seem to have been an issue for you guys in the quarter. So I was wondering if you guys could give us a sense as to your comfort level on the enterprise positive trajectory. Then the second was obviously the payoff from the forward pricing initiative has been the lower churn that you have been posting up. Are you comfortable letting people look at kind of a 10 to 15 basis point year-over-year churn improvement be the new run rate baseline expectation on a go-forward basis? Thanks

Well thanks, David. A couple of things, one, I go to tell you the performance enterprise has to do with our people, has to do with our enterprise sales team, both on a wire and the wireless side and the performance are now what provides our largest customers. I have the opportunity of meeting with about ten of our largest customers a few weeks ago in New York and I can tell you that they are satisfied with the kind of service, the quality, the security offerings those strategic services. So we are hard at work to continue the good progress we’ve made and I have decided that it is a tough environment -- very hard to continue in and our advantage is our wired network and capabilities as well as the ability to bind with wireless. On the payoff in lower churn we’ve certainly seen that payoff in lower churn we are not ready to establish a standard for that mainly to get through a full year because of this process before we even start formulating those numbers, but if you will two quarters in a row of best ever churn and year-to-date best ever churn. And those churn numbers of the postpaid side all below all the two digit range, range is very encouraging, but we got to be careful to continue to work hard and move this company forward. It’s a long process of transformation that we’re going through and we are nearing completion but we want to make sure we finish it very strong. So I’ll leave out the predictions on rates.

Okay. Thanks John.

Thank you. Our next question will come from Amir Rozwadowski with Barclays. Please go ahead. Amir Rozwadowski – Barclays: Thank you very much and good afternoon folks.

Hi Amir, how are you? Amir Rozwadowski – Barclays: Doing well, John. Seems to be some interesting buzz among the supplier community around the supplier Domain 2.0 initiative. Wanted to see if there was any updates from you folks on this front in terms of developments. And also, timing to some of your earlier commentary on CapEx trajectory. In other words, what you have seen so far, does that solidify some of your thoughts on the ability to drive down CapEx intensity in terms of your expenditures in some of the out years, John?

We continue to be optimistic on our software directed networks or network-on-demand trial in Austin, just this last few months has grown positive or excited about the opportunity to get a launch in Austin of a product on an Ethernet basis that is what we call network-on-demand. So those things are real. It may take time to implement and to do right and the team is striving to do it right, but we remain optimistic. With regard to the software-directed networks and the ability to use that to manage and harnessing our capital cost. We continue to remain positive. We take that into account in our spending projections in our assets. I would suggest you though it is a not a short road, but a long road when you have a company that has $100 billion of net, property, equipment that you are managing and networks that have a significant history to them. It’s going to take some time, but we remain positive and optimistic and yes, we are receiving savings or achieving value from those software directed networks and we hope to increase those amounts overtime. Amir Rozwadowski – Barclays: Great. Thank you very much for the additional color. Operator Thank you. Our next question in queue will come from Jonathan Chaplin with New Street Research. Please go ahead.

Good afternoon guys. Thanks for taking the question. John, two quick ones, if I may. So the bring your own device trend seems very positive. I'm just wondering, how do you deal with bring your own device customers coming over from CDMA? Do you give them a new handset or are all those coming from just T-Mobile? Then, secondly, I didn't quite understand your comment on the impact of bring your own device customers on the Next take rate. I would have assumed all of those customers would take Next -- would take the Next pricing. That would be what would be most attractive to them. If that's not the case, then I'm not sure why it would have impacted your revenue growth for the year. Thanks.

Okay, quickly speaking on the BYOD device, these devices are coming not only from competitors who operate similar networks or whose devices will operate on their network which maybe more than one competitor whose devices may actually work in our networks. But they also come from devices that are previously one end of the door and we are less at home and then these are handed down either to family or friends, neighbors or whatever the case maybe, people they buy them over eBay and bring them and have already paid from. So they come from a variety of sources, they could be reusing devices that had previously formed through our networks. That’s the first case. The second case is if those phones would have been sold by us, we would have had a – we are depending upon what the device cost a $500 of revenues and $500 of cost. It wouldn’t have provided any margin, it wouldn’t have provided any contribution but it would have provided revenue. So we still are getting our customer adds and we are getting a efficiency with the re-use of devices, we’re just not getting any revenue out of them and that is quite frankly a big piece when we are talking about over a million devices so far and choose your number on how much revenue we will get out of each one of those devices. You can understand the impact it could have even on a company of our size as revenue. So that’s the point there. We would have assumed that those kinds of devices people would have come in and gotten Next. Secondly, I would tell you we are making a distinction here. These BYOD devices aren’t getting the Mobile Share Value plans and generally speaking, they are getting the lower price service because they are bringing the device. They just are not getting Next because they don’t have to pay for a phone.

Got it. Okay thanks John I appreciate it.

No problem. Thank you.

Hey Tony, this will be our last question.

Okay, thank you sir. And that will come from Michael Rollinswtih with Citi. Please go ahead.

Thanks for taking the questions. Two, if I could. First, as we think about your move to consumption-based pricing and we also think about some of the changes in the sizes of the buckets for data, can you give us a sense of what's happening as you increase the data buckets, you try to encourage customers to spend more on data? Are you getting more in data revenue relative to those that might have started at a higher plan and can use the same amount, but moved to a cheaper bucket? Then the second question is if you just had an update on the regulatory process with the DIRECTV deal. I think the FCC put out an update on their clock today, and I am just curious if you could talk about the implications of that and any update from your perspective. Thanks

Sure on the data bucket I am referring back to the slide that we showed with regard to data billings and that they were up, of about 3.4% year-over-year. So what we’re seeing in this opportunity is this that we are buying off particularly with the Mobile Shave Value plan or try to get the 10 meg buckets so there are 10 gig buckets excuse me with buying up anyway. And then you got to have some impact in some cases on average rates and so forth, but quite frankly about the customer experience comes out of having these bigger buckets also. Additionally, and probably it’s supporting us anything, when they buy those data buckets they are adding things. They are going to add tablets, they are going to add variables, they are going to add other devices. Soon we have no adding connected cars and so what we – add other family phones or other members of the family tablets. And so what you see is they buy up these buckets and then they start using, I mean getting more functionality and then they are more tied to us. If you look at our Mobile Share Value accounts, I think we have about 16.5 million almost 17 million and we have about 47 or 48 million devices or connections on them. So these data buckets and that’s what happening its helping us get pretty sticky with the customers and that’s how we feel. The data billings increased almost over 20% is clearly what we point to you to say what’s going on with the data side. With regard to the DIRECTV the FCC didn’t make a decision today to stop the clock that decision has nothing to do with the merits of our deal or any information that we’ve provided. The FCC is automated clear that there was concern about the confidentiality of the information that sometimes when companies provide the FCC and they are trying to deal with those issues. We are confident in the FCC rigorous procedures for keeping the information confidential and we’re ready to provide them with the information they have requested from us. While the FCC is stopping the clock on merger review is fairly common, that today’s decision doesn’t change our view that we’ll be able to get the deal approved and closed by the first half, in the first half of 2015. So Mike that’s the color I would give you around that. We’re still optimistic about the transaction. The stopping of the clock is not an uncommon or rare experience and it has something to do with other issues than the benefit of our deal or the merits of our deal. So we’ll continue to support the process and look forward to getting the transaction closed within that originally announced one year kind of time frame. Mike Rollins – Citi Investment and Research: Thank you.

Before we close, I want to thank all of you for being with us this afternoon. As you can tell we have continued to make significant progress in transforming our business not only in the third quarter but all year long that now includes repositioning our postpaid base of the subsidy rattle but we’ve also did that while having strong net adds, strong postpaid gains and record levels of churn. We also had a strong performance in wireline with continued strong performance in new version strategic business services and our ability to combine our wired and wireless services for our customers benefit. We look to continue that solid momentum into the fourth quarter and finish the year strong. Once again thank you for being on the call. As always we thank you for your interest in AT&T and have a great evening. Take care.