Good morning, ladies and gentlemen and welcome to the AT&T Fourth Quarter Earnings Release 2007 Conference call. (Operator Instructions) I will now turn the call over to Mr. Rich Dietz, Senior Vice President Investor Relations. Mr. Dietz, you may begin.

Welcome to our Fourth Quarter 2007 Conference call. It is great to have you with us this morning. Joining me on the call this morning is Rick Lindner, AT&T’s Chief Financial Officer. As you have seen, this was another strong quarter for AT&T and the purpose of this call is to provide additional background on the results that we have published earlier this morning. Our release, investor briefing, the supplementary information and presentation slides are all available on the investor relations page of the AT&T website att.com\investor.relations. Before we get started, I need to cover our Safe Harbor Statement. Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in these presentations 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 our Web site at att.com/investor.relations. With that covered, let me quickly cover our Fourth Quarter EPS comparisons which are on slide four of the presentation materials. This quarter marks AT&T’s eleventh consecutive quarter and our third straight year of double digit growth in adjusted EPS. Reported EPS this quarter was $0.51. We had $0.19 of merger integration cost and non-cash amortization of intangibles. The result is $0.71, a 16.4% increase from year ago results. With that background, I will now turn the call over to AT&T’s Senior Executive Vice President and CFO, Rick Lindner.

I would like to begin with a few brief highlights which are covered on slide six. Our results this quarter are a continuation of the good trends that we have had in our business for some time. They are in line with what we outlined for you at our New York Analyst Day and they reinforce the confidence we have in our 2008 outlook. First, we had an outstanding wireless quarter. Gross adds were a record $6 million, we had $2.7 million net adds, the best ever by any US provider. ARPU is up and churn is down. Data revenue growth continues to be robust and total wireless revenues grew better than 16%, all in all just a terrific wireless quarter. We also took a significant step up in enterprise service revenue growth. Our sales funnel is strong and we have solid enterprise momentum heading into 2008. Our regional revenue trends are stable and with these dynamics, we are on track to deliver mid single digit growth in consolidated revenues in 2008. We continue to deliver on merger synergies. Our margins are solid, free cash flow is very strong and we are returning substantial value to shareowners. More than $19 billion in dividends and share repurchases in 2007. With a double digit dividend increased heading into 2008 and the expectation for continued substantial share buybacks. With that as a backdrop, I would like to cover down the quarter in a little bit more detail. Slide seven shows our earnings per share growth and margin expansion. As Rich mentioned, before merger related effects, our fourth quarter EPS was $0.71. Our eleventh straight quarter of double digit growth and adjusted EPS. Our fourth quarter adjusted operating income margin was 24% up nearly 600-basis points year-over-year and for the full year, our adjusted operating margin was 23.8%, well above our original outlook of 21% to 23% and at the top end of our more recent guidance of 23% to 24%. Given our expectations for revenue growth and cost initiatives, we expect our full year adjusted operating income margin will expand further into 2008 to the 25% to 26% range, and we expect to deliver continued double digit growth and adjusted earnings per share. In part, our expectations for margin expansion are based on continued merger synergies and new expense savings opportunities which continue to be substantial. Slide 8 has a synergy update similar to what we have provided to you throughout 2007. We continue to run ahead of schedule on AT&T Corp., and Bell South merger synergies. In 2006, we achieved $1.1 billion of savings from our AT&T integration. That is a combination of both expense and capital. In 2007, we moved that run rate up to $4 billion with 75% expense and the remainder in capital savings. This reflects good progress on network and traffic consolidations, labor savings and re-branding. Our Bell South and Cingular brand migration work is largely complete at this point. That includes vehicles, retail locations and advertising. Most important, we have a great deal of head room in terms of cost reduction. There is more upside ahead on synergies as shown on this chart and as we outlined for you at our analyst conference, we are also underway with operational initiatives that we expect to generate significant additional expense savings above these synergies. When you put the two of them together, our total operating expense savings run rate will increase by approximately $2 billion in 2008. We have good plans on the cost side. They are built into our operating targets and in addition, given our size, our expectation is to achieve continuous productivity improvements going forward. We also have substantial opportunity for top line growth and as I said, we are on a good trajectory to deliver mid single digit revenue growth in 2008. Slide 9 provides a look at our trends. This chart shows total revenue versus pro forma results for 2006. The slight decline in the rate of revenue growth this quarter versus last quarter reflects the impact of enterprise CPE or equipment sales, which had an effect on our revenue comparisons this quarter. Starting in 2007, we de-emphasized stand alone equipment sales in enterprise shifting our strategy to focus on CPE as part of total solutions that pull through service revenues. As a result of this change, fourth quarter 2006 had $180 million in CPE revenues than our current run rate. Going forward, we expect year-over-year comparisons for equipment sales to be much more stable. Adjusting for enterprise CPE, our fourth quarter year-over-year revenue growth was 3.5% and the drivers are continued solid mid teens wireless growth, further improvements in enterprise and stable regional revenues. In addition, going forward, we expect wholesale trends to stabilize as we move through 2008 and there are a number of factors driving this. Traffic migrations from industry consolidation are nearing completion. The year-over-year impact of merger conditions will be behind us by mid year, and we expect new revenues from our IBM alliance will begin to provide a lift to wholesale results. Also, national mass markets will become a smaller part of our overall revenue picture. This is the legacy AT&T standalone long distance business. It is already less than 3% of total revenues so the drag that we have experienced from that area of our business will be reduced as we move forward. Given these factors, we remain confident in our mid single digit revenue outlook. Our number one driver of revenue growth continues to be wireless which we show on slide 10. As I have said, we had a great wireless quarter. The total wireless revenues were up 16.3% and wireless service revenues were up 15.7%. The first driver is terrific subscriber growth. In the fourth quarter, excluding the Dobson acquisition, we set industry records for both gross adds and net adds. And for the full year 2007, we added more than 7 million subscribers and that was before acquisitions. The second driver is ARPU growth, total ARPU was up nearly 2% in the fourth quarter. It was our sixth consecutive quarter of year-over-year ARPU growth, and post paid ARPU was even stronger up more than 5%. Our network coverage is excellent and it is getting better everyday, our sales presence is strong. We are setting the pace with cutting edge handsets and these are all contributing to strong wireless momentum. Slide 11 shows the details on wireless subscriber growth. The fourth quarter versus a year ago, gross adds were up by more than half a million, nearly 10%. Net ads were up 13.5% to $2.7 million. And virtually all of the year-over-year increase in net ads came from post paid where net adds were up 37%. And post paid churn dropped by 30 basis points. At the end of the year, we had 70.1 million wireless subscribers and we have provided a table to show the math adding in the subscribers from our Dobson acquisition. That acquisition closed in November and did not have a meaningful effect on our net add total for the quarter. The other big driver behind our wireless performance is explosive growth in data. The highlights are on slide 12. Year-over-year, wireless data revenue growth was up 57.5% taking it to more than $2 billion for the quarter. This growth reflects strong increases in both consumer and business data usage. Internet access revenues were up more than 40%, messaging up more than 50%, email growth exceeded 60% and revenues from data access and media bundles were both up more than 70%. Data now represents close to 20% of our total wireless service revenues and $12.00 of our post paid ARPU, and yet, there remains huge upside to data growth. Only 37% of our post paid subscribers are on a monthly wireless data plan. Adoption of smart phones and integrated devices is on the rise, but the fact is, we are still very early in the adoption curve. At this point, about 12% of AT&T subscribers have these devices and ARPU’s for those customers are more than double the average. Data growth is also driven by an increasing number of subscribers using AT&T’s 3G network, which now includes more than 260 US Metropolitan areas. At the end of the year, we had more than 9 million customers using 3G devices, almost all of them added during the past year. We continue to be a leader in bringing to market a rich selection of both devices and services and a few our latest and most exciting are pictured on slide 13. We have expanded our lead in PDA’s with devices such as the Pantech Duo, a 3G global smart device available exclusively in the US from AT&T. The Blackjack II, which brings the personal computer experience to a compact wireless device. And additionally, AT&T is the world’s largest provider of BlackBerry service. We have made a point of leading in feature-rich handsets with AT&T exclusives such as the Apple iPhone which continues to generate very strong sales. Forty percent of customers who buy the iPhone are new to AT&T and iPhone subscribers have very attractive ARPU characteristics significantly higher than our post paid average, and the iPhone experience continues to get richer. As you may have seen, Apple has announced a number of enhancements to the iPhone including the ability to create up to nine customizable home screens, location-enabled maps, multiple address messaging and iTunes movie rentals. And one of the web-based applications users can place on their iPhone home screen now is yellowpages.com, our own electronic search service. Also, in the fourth quarter, we launched the Samsung Slim, that is Samsung’s newest lightweight mobile phone with music and multimedia capabilities. The Slim features Napster Mobile, a new service that lets customers purchase and download from a catalog of 5 million songs. AT&T is the only national provider to enable customers to purchase full track songs over the air from both Napster and e-Music, the world’s largest retailer independent music. We are also working with Wachovia and Sun Trust, and together we have launched a mobile banking service that will enable consumers to view account balances and history, transfer funds and pay bills from their AT&T mobile handsets. Our scale combined with our GSM platform makes us an attractive partner, both for device makers and service partners of all sorts. As evident in the line up we offer, as we make the wireless experience richer to drive subscriber loyalty usage and revenues. In terms of financial performance, one of the big opportunities we have in wireless is further margin expansion. The highlights are on slide 14. As you know, wireless margins in the fourth quarter typically show a sequential decline due to higher gross ads with our record gross ads this fourth quarter that is again the case. With that being said, our wireless margin trends are quite positive and continue the strong trends we have established over the past three years versus the year earlier fourth quarter, our adjusted wireless operating margin was 25.7% up 680-basis points and our adjusted service OIBDA margin was 38.2 %, up 380-basis points. There are a lot of drivers which we have covered with you in the past. We continue to improve our network cost structure, the IT systems migration and shut downs that we outlined as part of our merger integration are now complete and the shut down of our TDMA network will take place at the end of February. We have moved 390,000 subscribers off that network in the fourth quarter and about 390,000 remain, roughly two-thirds of them being wholesale customers. We have significant potential for wireless margin expansion going forward. In 2008, we expect a full year adjusted EBITDA margin in the low 40% range trending towards the mid 40s by the end of the year. Now let me turn to another key area where we saw substantial improvement and that is in enterprise. The details are on slide 15. The chart here is the one we have provided for the past several quarters. It shows year-over-year growth rates for enterprise revenues excluding CPE sales and M&A impacts. We have had a very strong two-year climb. Last quarter, we moved into positive territory at 0.3% and this quarter, we stepped that up to 1.8% and the momentum is good. Demand continues to be solid, data transport volumes are strong, IP services, which include virtual private networks, managed internet service and hosting grew 21% year-over-year. And we are winning contracts, when you look at sales results for the second half of 2007 versus the first half of 2007, our net new orders for products such as VPN, DS1 and DS3 grew by double digit rates, and for 2008, our new sales projections continue to look good. When you take into consideration that new sales can take three to six months to close and that we have seen no evidence of enterprise customers paring back on capital and project-related spending versus 2007, we feel confident in our ability to continue growing enterprise revenues throughout 2008. As we outlined at our analyst event last month, the dynamics behind our global business are positive and that includes both enterprise as well as wholesale. Slide 16 outlines the key trends. First, we have a premiere global network serving nearly 120,000 customers in 164 countries. We have 38 data hosting centers around the world and we are making smart and aggressive moves to advance that network overseas and here in the US where we are underway with the nation’s most extensive OC768 deployment. Second, we are seeing good fundamental demand and volume trends driven by wireless and application services. With a strong demand in applications management, we are seeing the shift to IP deliver faster revenue recovery times than we had anticipated, and third, when you look ahead at our wholesale and enterprise business, there are additional incremental drivers that we expect to help growth rates going forward. In October, we formed an alliance with IBM that calls for AT&T to become their primary global network management services provider. As a result, we expect to receive up to $5 billion of additional revenues over the five-year term of the agreement largely in the wholesale customer category at the outset and in enterprise as we build the business. These revenues are expected to begin ramping in mid 2008. This week, we announced a three-year marketing agreement with SAP America. We will serve as SAP’s primary independent hosting services provider for business customers headquartered in North America. As we add to our business through alliances such as this, we are also seeing reduced impacts to wholesale from the traffic migration that has occurred due to industry consolidation. That process is nearing an end. And the year over year impact of merger conditions on wholesale results will be behind us by mid year. When you take these factors together, it leads to our outlook not only for enterprise growth in 2008, but for a return to wholesale growth as well. We also had solid results in regional business, slide 17 provides a quick update. Our regional business revenues grew by 2.8% in the fourth quarter. Revenues from small and mid sized firms continue to be solid. They were up 5% consistent with recent results. Regional business data revenues grew 4.2% led by mid single digit growth in data transport and double digit growth in IP data revenues including areas such as VPNs, broadband and managed internet services. Regional business voice revenues also continue to grow in the low single digits, both local and long distance. And at this point, nearly 50% of our small business customers at risk to cable competition have bundled services and it has signed new term contracts with us and our activity in these areas reflected in the growth rates. Our product sets with strength in data services and key growth areas such as VoIP, IP data and application’s services give us an excellent opportunity in regional business. We expect it will be an ongoing area of strength for us with mid single digit growth. Slide 18 shows regional consumer trends where we continue to deliver stable revenues consistent with the results over the past several quarters. Broadband penetration of consumer primary lines now approaches 39%. In our west region, California and Nevada, broadband penetration is above 45%. Consumer video penetration moved up to 7.6% that is satellite and U-verse TV. With gains in broadband and video more than offsetting declines in traditional voice lines, over the past year, we have had a net gain in regional consumer connections of 568,000. In our consumer ARPU based on primary lines, was up 4.9%. I mentioned that our December 11 analyst event in New York that we had seen some evidence of economic softness on consumer, primarily in access lines and broadband net adds. We have this level of economic softness baked into our business plans and as a result, there is no change to our outlook at this time, which is for continued growth in regional consumer driven by broadband and ramping video revenue. Slide 19 shows our broadband results where we continue to deliver solid double digit growth in both revenues and subscribers. We had a net gain in the fourth quarter of just under 400,000 and over the past year, we have had a net gain of 2 million broadband connections. That includes a significant ramp over the past quarter in broadband sales without a traditional wired voice line, either standalone or more often, in our wireless broadband bundle, which we launched in August of 2007. And we continue to deliver solid double digit growth in broadband revenues up nearly 14% in the fourth quarter. We believe there continues to be substantial opportunity ahead in broadband as we add more features and options in the first quarter including free WiFi access to subscribers who take speeds at 1.5 megabits or above. As you know, we have the largest WiFi coverage of any US provider, plus in the first quarter, we are adding a new 10 megabit broadband service on our U-verse platform. The other driver in our consumer business is video and we continue to see a solid ramp in U-verse as we show on slide 20. Since our last quarterly update, we have added new markets, we are now in 41. We have expanded coverage in existing markets and our install rates have climb. In mid-December, our last good pre-holiday week, we had approximately 12,000 installs above the 10,000 per week target we have set for the end of the year. Our technicians are gaining experience and expertise. We are seeing further reductions in installations times, churn continues to improve and customer response is very positive. We have expanded our deployment plan to include the southeast region with a target of reaching up to 30 million homes by 2010. We have just launched our U-verse Voice-over IP service in Detroit and we will continue to roll that out to additional markets in 2008. We expect a continued strong ramp and as we said at our analyst conference, we expect our install base to exceed 1 million by the end of 2008. I would like to close with a few comments on cash flow on slide 21. For the full year, cash from operations total $34.1 billion, free cash flow totals $16.4 billion and we returned substantial cash to shareowners, $19.1 billion when you combine more than $10 billion in share repurchases with our dividends paid. As a result, our free cash flow yield has grown and exceeds that of our peers. And as we laid out for you before, we have a strong balance sheet. We intend to keep our credit metric stable with a debt to EBITDA multiple in the 1.3 to 1.5 range, and our strong and growing free cash flow gives us the flexibility to both invest in the future of our business and return to substantial value to shareowners. As you know, we have grown our dividend every year on our history including a 12.7% increase announced in December and we expect to continue share repurchases. We announced a new repurchase authorization for 400 million shares which is about 6.6% of our yearend shares outstanding, and we expect to exhaust that by the end of 2009. So with that, let me close with a quick recap. I think we had a very solid fourth quarter. We are seeing accelerating momentum across some key growth areas in our business in wireless, in enterprise and in video. What we are seeing in the economy is consistent with our 2008 operational plan and we are confident in our ability to execute on that plan as we have discussed in our December analyst meeting. We expect to ramp revenue growth in 2008 to the mid single digit range. We expect to expand our consolidated adjusted margins into the 25% to 26% range and we will continue to be a strong free cash flow company, which allows us to invest in the business and return cash to shareowners. We have a deep management team, one that is financially disciplined and with a strong record of delivering on targets. That is AT&T today. With that Rich, I think we are ready to open up the lines for some questions.

We will now begin the question and answer session. (Operator Instructions) The first question comes from Simon Flannery from Morgan Stanley, please go ahead.

I wanted to ask about U-verse if I could, can you give us some sense of the dilution in the quarter, any early learnings about things like churn, and also the updated timing on getting a second HD stream and then on the iPhone, if you could give us some iPhone numbers where we stand at the end of the year and any commentary on the business pricing that was rolled out this week.

Let me try to address your questions there, first of all, we feel very good about U-verse results in the fourth quarter. They were right where we had targeted them for the quarter. Churn rates, any new product, churn rates are a little bit misleading because you do not have much of a base there, but our churn rates in U-verse are very good. They are comparable right now to what we are seeing in access line in broadband kinds of churn, and I actually believe they will decline from there. I would expect they would decline to sub 2% levels as we start to build the base further, but churn and customer response to the product continues to be good. Dilution for the year in U-verse was a ride at $0.11. That is right where we had projected it for the year and going forward, there is no change to our outlook of guidance in that standpoint. I think as we go into 2008, we ramp and launch additional markets, increase our gross add activity. I would expect incremental dilution next year in the $0.12 to $0.14 range, but the product is moving along very well. We do have as you note, we have got some product enhancements slated for 2008 that I think will be key including whole home DVR capabilities, second HD stream and we would expect to have those begin rolling those out in the market around mid year and then a third enhancement that will be frankly important to us going forward because it will enable even additional HD streams will be where they are required, will be pair bonding which we expect late in 2008. So, solid results continue, I think on U-verse. With respect to the iPhone, results continue to be very good. We had very solid sales results in both October and November and in December, as you would expect from kind of the normal monthly run rate, we had almost doubled the sales in December. I think, clearly as we go forward, Apple will continue to enhance the product. We see some software enhancements being announced and planned for 2008, so I think it will continue to be a very strong product for us. ARPU’s on the iPhone are very good as you would expect. The people that acquire that phone first of all tend to have strong voice ARPU’s, but then in addition are putting data packages on top of it and so, similar to what we see in our entire smart phone and integrated device line up, we are seeing ARPU’s that are nearly double what average ARPU’s are and the rest of the base.

Can you just help us reconcile the $4 million number that Apple gave to what you might be seeing in terms of how much of that is over season, how much of that is being bought for unlocking?

It is difficult to reconcile those numbers and it would become increasingly more difficult going forward as Apple expands into more overseas markets, but essentially, we have finished the year, we were just at or just slightly under 2 million iPhone customers in the base, and if you start to try to reconcile those numbers, the big reconciling items will be first of all, there are devices that we have purchased that are in inventory. There are devices that have been sold and shipped, some of them online, but were not activated at that point, so that creates a reconciling item, and then third, there is certainly some devices that are being purchased through channels in the US or purchased through online channels that are actually going to international markets, so that creates another reconciling item there, but when you look at a device that has been in the market for six months basically, half a year, it is 2 million devices. You have to back it up to largely our post paid base. That is pretty significant growth in a short period of time and we continue to see it as a very strong product.

Your next question comes from David Barden from Banc of America Securities, please go ahead.

Maybe two related questions, I guess talking about the economy obviously, I think the stock is down about 13% from Randall’s comments at the beginning of the month talking about the softness that could creep into the consumer business although it was not apparent to me that we actually saw it coming full force in the fourth quarter. I guess that the concern here though is that the expectations that have been laid out for 2008 encompass positive economic scenario which if the data starts to deteriorate AT&T just will not be able to live up to and that seems to be the best at the market is making, so Rick, I was wondering if you could kind of just discuss the tolerances around the economic scenarios that you have baked into the 08 expectation. How much more unemployment? What kind of GDP growth expectations are the minimum necessary to expect that enterprise can continue to grow that consumer revenues can continue to grow et cetera, and then I guess the second part of that would be that whole discussion has extended to the wireless arena where data revenue growth has been the biggest driver of it. There is an argument that maybe that is a discretionary component of the business and therefore, it could not possibly be a strong in a softer economic climate, counterbalancing that is the fact that you only have 12% of your device that are smart phones and there is a large component of well to do people who could be using it, but are not. So I guess, if you could kind of talk about those issues as we look into 08, it would be very helpful. Thanks.

Be happy to do that, David. As you all know, there has been an awful lot of noise in the market and the media about the economy and what I would first say is that if you go back to the comments that we have made, first of all going back to our analyst conference in December, I made comments in my presentation in December that we were seeing a little bit of softness in some of our consumer metrics and in response to some questions at the conference. We talked about some increases in non-paid disconnects and things that frankly, you would expect, I think somewhat given trends in the overall economy. In January, our Chairman, Randall Stevenson made some very, very similar comments. What caused those comments suddenly in January to be more of a media event than the similar comments we made in December, I cannot say, but putting that side, let us talk about and look at the results we had for fourth quarter, where we some softness as we had mentioned is in access lines where the rate of switched line loss increased somewhat in the fourth quarter and we saw some slowing in broadband net adds. In both of those cases, both of those products are impacted by some of the things we see in the housing markets, some slow down in home sales, slow down in new construction. They are impacted as well. Some small up tick in non-paid disconnects and to put in context, for both products, in the neighborhood of about 10-basis points of additional churn non-pay related that we saw in the fourth quarter of this year versus fourth quarter of the prior year. Those were trends that we were seeing in December, we have baked those in to our operational plans and they are reflected in the guidance that we have given. As you look across the rest of the business, we are clearly not seeing any impacts in our wireless business at this point. Wireless continues to be very strong both in customer growth and in ARPU growth. And to some degree it reflects, I think changes in terms of the way people are communicating today versus maybe ten or 15 years ago, or if you go back to any last consumer economic softness we have had and that is simply that wireless in terms of access and connectivity is very important to people today. We are not seeing any impacts as we have said at the Analysts Conference and I think as you see in our results, in sales to business customers and particularly in sales to enterprise business, and if you think about the products we are selling there and the focus in that business and the movement of customers and traffic to IP that is something even in a difficult economy when companies are looking to reduce cost that is actually a service that facilitates and helps them provide more bandwidth and more productivity within their business at lesser cost and so, it is not surprising actually that as you look at the results and look at the fourth quarter results that the strength that we have had in IP based revenues there. So, when you put all of that together, we feel good about our guidance and our plan for 2008. The economy is always a risk, but I think when you look across our business, we are relatively, I think defensive in nature in these kinds of downturns and wireless particularly, for the reasons that you mentioned and some of the things I mentioned in the presentation, the fact that the ARPU growth is being driven by data and that data growth is being driven by new devices, new smart phones, new integrated devices and it is being driven by the move to 3G, and together those things are opening up a whole new host of applications that I think will bring value and it would be very interesting to our customers. I think that makes us feel very good about the outlook for wireless as we go into 2008. So, the economy is something and the impact on our business is something we monitor. We will watch every quarter as we look at our results across each of the business unit, but at this point, what I have described to you is what we have seen and it is just some limited impact in our access line and broadband results and I would tell you, even in broadband, while we certainly would say that fourth quarter net adds were a little lower than we had seen in prior quarters, when you annualize the broadband net adds we had in the fourth quarter, they are still growing at better than a double digit pace, so we are still seeing pretty nice growth there.

And Rick, just to follow up real quick, the difference between December and January was I think that the market became much more convinced that there was less of a debate about the economy actually softening, so can you just kind of reiterate that with respect to all of the incremental data that has come out to this point. Your conviction level is still there that you have kind of baked in the appropriate baseline economic environment within a range of reasonable assumptions into the numbers.

I think if I understand your question, you are asking with any incremental data we have seen in January, are we seeing trends that support our outlook and the answer to that is yes. Keeping in mind that we are only talking about a few weeks of activity, but generally, what we have seen so far this year relative to the fourth quarter is we have actually seen I think in these first few weeks we have seen broadband improve somewhat over the run rates we had in the fourth quarter and we have seen access lines certainly in terms of our run rate be at or maybe a little better than we saw in the fourth quarter, but certainly not worse.

Your next questions comes from John Hodulik from UBS, please go ahead.

Two questions, first in terms of consolidated revenue growth, it looks like CPE had a larger than expected impact on the numbers this quarter. Is that 3.5% growth rate without CPE sort of a good starting point as we look out into 08? I realized the guidance is 4% to 6% and you went over what are the drivers to get us to accelerate, but are there any other issues that could sort of surprise us from a negative standpoint besides the economy? We have seen the growth in wireless, I think it seems like you have good visibility on enterprise, I am just wondering just sort of some idea of how to expect the growth to trend over the next few quarters. And then on wireless, looks like the margins were a little lighter than we thought, could you talk a little bit about that, the strategy in the fourth quarter and how that plays out in the first quarter in terms of promotions and subsidies and maybe the rate of upgrade you saw in the quarter and do we still expect a nice bump in the first quarter with the turn down of the TV main network?

Going back to your first question on revenue growth, first of all you are right, excluding CPE revenue growth was 3.5%. It has had an impact on us in just about every quarter in 2007, but fourth quarter was bigger in terms of impact and the reason for that is really kind of simple. As we went through 2006 and we started looking at product and services and what products were selling, throughout 2006, particularly, let me just talk about the enterprise business and their price sales, we were selling equipment that we kind of divided into two buckets, there are some equipment sales that we make that facilitate and pull through network services and they are sold as part of a package service and that is something that we feel good about and we like the economics on and it is just business that makes sense to us. In 2006, we also that we had some CPE sales and it was as much as 20% to 30% of our CPE sales that when we looked at them they were standalone sales, did not pull through network services and they really did not have any margin to them and we decided at the end of 2006, that is not where we wanted our resources and our focus and our sales force to be focused on, so we did a couple of things, we made some changes to pricing, in terms of how we were going to sell CPE and probably more importantly, we made changes to our commission plans. And both of those changes by the way have the desired impact and so what we have seen in 2007 are generally are lower levels of CPE sales, but the CPE reselling is part of package deals and is carrying with it reasonable margins and so we have got the desired result from it, but then you compound all of that with the fact that fourth quarter is typically a higher quarter for equipment sales and that is why you saw the impact in the fourth quarter. When I step back from it and say, ‘how do we get comfortable with the run rates we are on and the move to mid single digit revenue growth?’ First of all, the impact from CPE, I think as we go into 2008 versus 2007 will be much more on our current run rate, we will not have the Delta that we had between 2007 and 2006. Secondly, one of the factors that I think is significant to us is we do see that wholesale which has throughout 2007 had a year-over-year decline in the 7% to 8% range, we feel will stabilize in 2008 and begin to grow for the factors that I have mentioned in the presentation that we are nearing the end of consolidation of traffic which has impacted wholesale that by midyear 2008, we will be at the one year point for some of the price reductions that we put in place as part of our merger conditions and so that will cease to be a drag. And then finally, the IBM agreement as it begins to phase in at 2008, will provide a lift to wholesale revenues. And then the third factor from a revenue gross standpoint is just the math and the mechanics of the national mass market business, which at the end of the year was really down to around 2.5% or 6% of our total revenues. The drag from that national mass market decline will be less going forward in 2008 and 2007, so as I look at other issues in revenues, obviously, of the other thing that mid single digit revenue growth hinges on is just maintaining the trends we have seen in the business and we are actually seeing some acceleration of trends in wireless which is good to see. We are seeing some acceleration in trends in enterprise and we are seeing despite the economic impacts, continued stable trends in regions, so as we move forward, I think because of those factors that it all gives us comfort in continuing to ramp up revenues. Finally, when you look at wireless margins, as I said, it is not unusual to have wireless margins pulled back a little bit in the fourth quarter. When we look at fourth quarter results, it is almost entirely due to increases in acquisition cost, selling cost, equipment cost, as well as upgrade cost. The fourth quarter is also a high upgrade quarter, so we had about 8.5% of the base upgrade in the fourth quarter which drives it as well. I think going forward in wireless, it was a typical fourth quarter, I think in terms of pretty aggressive promotions around devices and handsets, but as we see the results from particularly the higher end devices we are selling, the results in terms of ARPU is very strong, so it gives me a lot of comfort in terms of what we are doing with those devices. I think a key will be how the market continues in the first quarter, typically the first part of January, you continue with some pricing and some promotions you had over the holidays and then the question will be how does the market develop after that, but we will get lift. We will get lift from the TDMA shutdown. I would not look for that necessarily in the first quarter. I think we will see that begin to ramp in the balance of the year and we will shut that network down in the first quarter, but then we still have to remove equipment from cell sites and we have to get relief from the rents we are paying on the equipment on those sites. We will have to adjust our transport, our infrastructure between the switches and cell sites to reflect removal of that equipment. There is a lot of work to be done to get the remaining TDMA cost out of the network, so you will see that, but you will see it as we go forward in 2008.

Your next question comes from David Janazzo from Merrill Lynch, please go ahead.

Rick, you have spelled out the cost cutting synergy opportunities, other operational initiatives and obviously, U-verse is going to be a little more diluted, but I noticed that headcount is increasing and how does that square with some of the cost cutting and other initiatives.

We have had some increase in headcount. It is a number of buckets. One is certainly, we are at the same time we are taking force out of the business related to the merger synergies and the other cost initiatives. We are adding force in some areas, for example, we are adding force primarily in terms of technicians and installers for U-verse and so we are starting to ramp that up and there is a lead time to that. We have got to hire people and get them trained and get them on board as we start to launch new markets, so that has been one factor. We have also, as part of our merger conditions and we had made some commitments to bring some jobs back that had been outsourced to bring some jobs back into the country and so we are following through on those obligations, so there you may see some headcount increases. We are trying to do it in such a way that we can minimize any cost increase from it, so we are eliminating outside contractor cost as we are doing that. And then finally, we have got some increases that are related to transactions that we have done, so part of the increase is to bring in about 2500 from the Dobson acquisition in November. We are also bringing people on as part of our IBM agreement as we take over the network management, much of which or some of which had been done in house at IBM, we are bringing some employees in there to handle that business. And finally, we have got some contracts that require us to provide some staffing. For example, we have a government contract in support of the passport offices for example and they have had high volumes and so we staffed up there, but there is corresponding revenues to go with that. I think those are the major things that have impacted force, but our force initiatives related to both the synergies and the other cost initiatives continue to be on track.

The next question comes from Chris Larsen from Credit Suisse, please go ahead. Chris Larsen- Credit Suisse: On the CPE sales, do you have a sense for where those customers are shifting their purchases, are they buying them directly from the OEM’s or are they going to some of your competitors who are still heavily discounting those products? Secondly, the Apple ARPU, do you have a report of net of any payments that would go to Apple in your wireless revenues, and then third, and probably the more important of the questions, I am assuming in your stock buy back, you are in a window where you cannot buy back. When does that window open up and if you look at your after tax cost of borrowing, it is now meaningfully below your yield and how do you think about leverage short term in terms of buying back stock relative to your cost of debt?

I will try to knock those off one at a time. In CPE, part of the reason for us de-emphasizing sales of standalone CPE as I said is that there is very little margin. We found very little margin in that business because there are a number of alternatives for companies to purchase essentially whether it be a server, a router or whatever it is, the same piece of equipment, and what you find yourself is you are competing with other dealers of that particular equipment, you are competing in many cases with the manufacturer itself, and so I cannot give you any data in terms of where those purchases have gone, but there is a pretty broad range of alternatives available and that is why it is just not for us a very attractive business. In terms of ARPU on the iPhone, the iPhone ARPU is reported gross and any sharing or payments are reflected in expense for the iPhone and that is not different from other relationships that we have had for years, for example, our agents, typically, as they sell new customers for us, they receive a commission on the sale, but they also receive some residuals I am sure of revenue and those are always reported in expense. And finally on stock buy back, we have not been in the market in January because of the earnings release and so, we will resume our share repurchase program starting tomorrow and certainly, we will take advantage of both where borrowing rates are as well as where the share price is and we have a plan as you know to repurchase 400 million shares we spread over this year and next year, but part of that plan includes increasing leverage not necessarily reducing our credit metrics, but increasing leverage as our cash flow continues to improve, so it will be as we did in 2007, we will be increasing some leverage in 2008, and we will be using that for share repurchase, so our expectation as I have said is to be back in the market tomorrow.

The next question comes from Jason Armstrong from Goldman Sachs, please go ahead.

First on Wireline, in the prior cycle, you guys were really the first to flag the weakness on the consumer Wirelines out of the business and in a large part, I think it is due to geographic diversity in the business, so related that, the step up in access line, I know you sort of characterized it between non-pay housing starts, but can you talk about it geographically, is a lot of this tied to mid west sort of AmeriTech markets or is it more evenly distributed? And then second question is just a sort of a follow up on numerous economic questions, it seems like the economic base case here is still similar to the Analysts Day which you termed at the time sort of soft landing, if you hypothetically assume, we move to the hard landing scenario, which I am sure you have run some scenarios on, how would that change your approach to the business and maybe specifically on the cost side, what are the levers, the CapEx reductions, the reductions of buy backs, maybe you can steps us through how you would think about the levers at that point if we reached it.

First on the impacts we are seeing in Wireline, I have looked at the data, I have looked at it by state and by region and to be honest with you, I am not seeing any clear patterns in terms of changes in the trends, there is certainly some weakness geographically in the mid west states, upper mid west, but if you take some cities there, Detroit for example, they have had issues there for some time related to the auto industry, so I cannot say what we are seeing is an increase in a particular area at this point. I do not see any particular patterns there. I think it is more spread across the geography. And again, when you are talking about a ten-basis point impact on non-pay churn that is not a huge impact, so you are cutting it pretty fine. You should try to see it by state or region. Right now, from an economic standpoint, we have got experts that are much more qualified to talk about this certainly in the country than I would be, but we have got experts kind of on both sides in terms of predicting what the economy will do in 2008. What I would tend to focus on or what I intend to focus on more is what impacts we are seeing in our business and as I said, there are some impacts we have seen as we talked about in consumer and in access lines and broadband, but they are not very severe at this point, and I think for us, that continues to point to more the defensive nature of our business. And in consumer, whether you are looking at wireless or Wireline, consumers still are going to want to stay connected. They are going to want to stay connected through a voice service and they are certainly going to want to stay connected for a data and broadband service, and then on top of that because we are a new entrant, we have got lots of opportunities there on the video side. As you start to work into business customers, I think the kinds of products we are offering and the solutions we can deliver in IP are really answering problems or issues or challenges that businesses are facing in terms of how to provide greater levels of bandwidth, greater numbers of applications and connectivity throughout their business and to try to do it in a cost efficient way. That just naturally drives customers to IP which is a sweet spot for us. So, I think for me, what that says is I think our business continues across a spectrum to be pretty defensive in times like this. In terms of cost levers, one of the things that we have gotten I think very good at is knowing how and when to tighten our belts on the cost side, and something that I think is still surprising to people over all is the level of cost in our business that tend to be variable. We are viewed often times as a large network based, very fixed cost business, but when you look at the cost in our business, the largest element of cost in our business is force, but when you take that down to the next level, and this surprises people sometimes, it is not force supporting our network, but it is force that is involved in sales and in customer service and in our call centers. And those areas tend to really regulate themselves versus the volumes we are seeing in the business, so as volumes decline, calls into the centers decline, there is always regular attrition in those jobs and so we are able to adjust our force in those areas pretty easily. And even on the network side, think about the amount of force there that is tied to activity, either installation or repair activity and so again, as volumes decline, that is pretty self regulating. The second largest area of expense in our business is access, which again also tends to fluctuate with volumes, and so when you put it all together about 60% to 70% of our expenses are relatively variable with revenues and volumes, so I think that is the only thing that gives us comfort as we go into a period of time where there is some questions about the strength of the economy.

Our final question comes from Mike McCormick from Bear Stearns, please go ahead.

Question, I hate to beat the horse on wireline cost sales, but it looks like the sequential drop in cost of service or cost of sales was fairly dramatic, just trying to get a sense for, if there is any sort of one time impact for the quarter and then looking forward, if we have that kind of expense saving run rate, maybe just your thoughts on, if you have wholesale revenue getting more stable with continuation in these cost saves, it seems like margin expansion could ramp towards the back half of the year, but maybe within the wholesale revenue piece of that, can you give us any sense for what percentage it might be wireline carrier revenue? And then secondly, a little more clarity on the merger anniversaries, is there is going to be some special access pricing change and I will hit you with one more before I go, which is on post paid wireless adds. It was a good quarter overall for the adds, but within post paid, still trailing your other competitor out there with a quarter that is ramping up, it was dismal by most measures, just your sense on how we can take more share of those post paid stuff going forward?

First of all, on wireline cost of service, there are no big drivers there, in fact, when I looked, and maybe we need to get in to some of the numbers with you individually in more detail. When I look at the wireline business third quarter to fourth quarter, the margins were relatively flat. If you look at EBITDA margins relatively flat between third quarter and fourth quarter and what we are seeing there is continued improvement in terms of merger synergies and the other cost initiatives offset by the fourth quarter I think primarily two factors, one is certainly the continued ramp in U-verse provided a more expanse, a little more dilution in the fourth quarter versus third or second quarter of last year. And then secondly, the fourth quarter typically is a little bit lower in terms of revenue simply because of in the wireline business just lower business days due to the holiday, so fourth quarter would typically be a lower margin quarter for us. We held at about flat this year and that was primarily due to improvements in the cost and merger synergies.

I guess the surprise there was typically, you have margin pressure because presumably a relatively fixed cost base with your business days and you are certainly a solid AT&T Corp., and I guess I was surprised by the strong cost reduction in this quarter.

Well, we had a nice ramp in some of the merger synergy areas and we have some, I think a very good cost focus in our wireline business particularly in the regional wireline business, so I think that helped us in the fourth quarter. In terms of wireless, the post paid ads as you said showed a nice increase year over year and we feel very good about our post paid sales activity and the volumes we are seeing, store traffic we are seeing. I think the challenge for us and what we have to do as we go forward in 2008 is to continue to migrate churn levels down, and certainly as we get beyond the TDMA shut down, I think, that will help churn levels reduce, and we need to take another over time, another 20-basis points or so in a lot of our post paid churn and that will make, I think a huge difference.

You see opportunity on the Dobson churn as well?

Yes, I think overall, I mean I think Dobson will help us. I think we will be able to improve overall Dobson results because we can offer customers in the Dobson areas, I think a much more robust product portfolio and secondly, we will see some churn improvement because we will see some margin improvement because we will be taking some roaming cost out and just having those areas and being able to better them into our networks, we will spend a little money on improving network quality in some of those areas and that will drive better churn for us as well. A good example is Dobson has an area north here of San Antonio, and it is an area where a lot of people in the San Antonio Metropolitan area travel too and so I think the ability to tie that into our network will provide a better customer experience and better churn rates there.

Do you have anything on the wholesale revenue for us, Rick and what percentage might be coming from that wireline carrier revenue base?

I do not have that percentage for you, but generally, the wireline carrier base revenues have been declining because that is where in effect, you see the impact of consolidation in some areas. We are continuing to see very good growth in the wireless and we are seeing some growth in international, and I think where we have opportunities going forward, it is going to be in some of the things we mentioned in particular the IBM agreement.

That will conclude our question and answer session. Rick has some closing comments before we adjourn for the morning, Rick.

Thanks to all of you for being on the call with us today. I will just reiterate, I think we had a very good fourth quarter, certainly, terrific wireless growth. We are very excited about what we saw in the fourth quarter from a wireless standpoint, excellent momentum, continuous at enterprise, which I think is a good sign for us as well as stable revenue trends and regional operations. We continue to focus and push cost energies and they continue to run ahead of schedule and all of that contributes to continued double digit growth in adjusted EPS and strong free cash flow, along with debt-free cash flow. We are happy to report more than 19 billion return to shareowners in 2007 through dividends and stock buy back. I think you can tell, overall we are very proud of the 2007 results, but I think what is more important frankly today is I believe the opportunities that still lie ahead for us. We have good momentum in some key areas of the business that will allow us to ramp top line growth. We continue to have substantial opportunities to remove cost. We are on track with the initiatives that we outlined for you in December and all of that gives us confidence in reaffirming our outlook and our ability to drive strong results in 2008. As I have said at the Analyst Conference last month, I think AT&T today has a very strong financial profile. We are a financially disciplined company. We are capable of sustained double digit growth and adjusted earnings per share. We are a strong cash flow company and a company that is committed to returning value to shareowners with a strong dividend yield. And I think that profile along with some of the defensive characteristics of the business that we talked about today makes us especially attractive in the current economic and market environment. I want to thank you all again for taking part in the call today and it is always for your interest in AT&T.

Thank you, Rick and thanks to all of you, Christine, that will conclude our call for today.

Thank you ladies and gentlemen for participating in the AT&T Fourth Quarter Earnings Release 2007 Conference Call. This concludes your conference for today. You may all disconnect at this time.