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    correspaug2009.htm

AT&T Inc.

208 S. Akard St.

Dallas, TX  75202

August 14, 2009

Securities and Exchange Commission,

100 F Street NE

Washington, D.C. 20549

Re:      AT&T Inc.

                            Form 10-K for the Year Ended December 31, 2008

    Filed February 25, 2009

            Form 10-Q for the Quarterly Period Ended March 31, 2009

                            File No.  1-8610

Ladies and Gentlemen:

We are in receipt of the letter from the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), dated July 10, 2009, to Mr. Richard G. Lindner, of AT&T Inc. (the “Company” or “we”).  For your convenience,
we have included the Staff’s comments herein and keyed our responses accordingly.

We acknowledge that the adequacy and accuracy of the disclosure in the filing is our responsibility.  We acknowledge the Staff’s position that comment or changes in response to the Staff comments in the proposed disclosure in the Forms 10-K and 10-Q do not foreclose the Commission from taking any action with respect to the
filing.  We also understand the Staff’s position that the Staff comments may not be asserted as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

The Company’s responses to the Staff’s comments are set forth below and prospective disclosure has been written in bold type.

Asset Valuation and Impairments, page 20

1.

 We note your response to prior comment 8.  Please disclose a breakdown of your goodwill balances of December 31, 2008 by reporting unit in your discussion of goodwill within critical accounting policies.

Response:

We will include the relevant information from the Notes to Consolidated Financial Statements in the MD&A discussion of critical accounting policies on goodwill.

2.

  We note your response to prior comment 9.  Please revise to describe quantitatively the significant estimates and assumptions used in your valuation method to determine the fair value of your wireless licenses.  Further, quantitatively and qualitatively describe in detail the changes in the estimates used in your assumptions
to determine the fair value of your wireless licenses.  In addition, disclose how the assumptions in your most recent test were impacted by the current economic environment, if at all.

        Response:

Following is our revised prospective disclosure regarding the determination of the fair value of wireless licenses.  Changes to our previous prospective disclosure are italicized.  In addition, the disclosure will reflect whether the current economic environment has a significant impact on the test.  The x.x%
notations included below would agree with any publicly reported amounts used for the base period in the model.

Wireless licenses are not amortized but are tested for impairment annually in the fourth quarter.  The licenses are tested on an aggregate basis, consistent with the management of the business on a national scope.  If there are indications of significant decreases in fair value of the licenses,
testing may also be done sooner than the annual test.  There were no indications of this in 2009.

Consistent with prior years, we performed our test of the fair values using a discounted cash flow model (the Greenfield Approach), which assumes the licenses are the only assets owned at the outset (i.e., a "raw license").  We utilized a 10 year cash flow
model for this test.  Some of the financial factors in this model included our historical revenue growth of x.x% for the period xxxx and projecting a normal maturation of revenue growth; existing service OIBDA margins (operating income before depreciation and amortization divided by wireless service revenue) of x.x% for the period xxxx and anticipating growth to more than 40%; and churn of x.x% for the period xxxx and forecasting it to stay consistent with industry leading churn.

This model then incorporates cash flow assumptions regarding investment in the network, development of distribution channels and the subscriber base, and other inputs for making the business operational. The assumptions which underlie the development of the network, subscriber base and other critical inputs of the
discounted cash flow model were based on a combination of average marketplace participant data and our historical results, trends, and business plans.  Operating metrics such as capital investment per subscriber, acquisition costs per subscriber, minutes of use per subscriber, etc. were also used to develop the projected cash flows.  Since the cash flows associated with these other inputs were included in the annual cash flow projections, the present value of the unlevered free cash flows
of the segment, after investment in the network, subscribers, etc., is attributable to the licenses.  A portion of the terminal value of the segment, which incorporates an assumed sustainable growth rate, is also discounted and is likewise attributed to the licenses.  The discount rate of x.x% used to calculate the present value of the projected cash flows is based on the optimal long-term capital structure of a market participant and
its associated cost of debt and equity.  The discount rate utilized in the analysis is also consistent with rates we use to calculate the present value of the projected cash flows of licenses acquired from third parties.

If either the projected  rate of growth of cash flows or revenues were to decline by 1%, or if the discount rate were to increase by 1%, the fair values of the licenses, while less than currently projected, would still be higher than the book value of the licenses.  If there had been a x% decrease
in the fair value of the licenses, the fair value would still have exceeded the book value.

Note 4. Segment Information, page 47

3.

 We have reviewed your response and the information presented to your chief operating decision maker as of December 2008, and it appears that the business units presented on the Bates numbered page 00010 are each separate segments under SFAS 131.  In this regard, we note the separate presentation of the Northeast Wireless, Southwest Wireless,
Central Wireless, West Wireless, Consumer Markets (Wireline), EBS, Wholesale Regional Business Markets, Network Services and Operations Support, Advertising Solutions, International, Sterling and Customer Information Services/Other.  With respect to Network Services and Operations Support, if it can engage in business activities from which it could earn revenues, then it would be considered an operating segment as contemplated by paragraphs 79-80 of SFAS 131 (for example, if they charged the other components
of your enterprise for services provided).  We believe that each of these components constitute an operating segment as discrete financial information is presented to your chief operating decision maker on a monthly basis.  We note that this information contains operating contribution by each business unit in which the chief operating decision maker can make decisions about resources to be allocated and assess performance.  In addition, we note that these components are led by various
individuals who appear to be segment managers as discussed in paragraph 14 of SFAS 131.

If you believe any of the above operating segments can be aggregated under paragraph 17 of SFAS 131, please provide us your analysis and financial information for all periods presented in your filing.  In addition to your analysis of paragraphs 17.a through 17.e please provide us with an analysis that includes historical and projected revenues, gross margins, gross margin percentages, adjusted EBITDA,
and adjusted EBITDA percentages, along with any other information you believe would be useful for each of your operating segments to help us understand how these operations are economically similar.  Please also address any differences in the trends these financial indicators depict (e.g. if margin is decreasing for one operation and increasing for another).

Similarly, if you believe any of these operating segments are not required to be reported separately under paragraphs 18 – 21 of SFAS 131, please provide us an analysis to support your position.

Regarding your reports provided to the chief operating decision maker for March 2009, it appears that the business units presented on the Bates numbered page 00055 are each separate operating segments under SFAS 131.  In this regard, we note the separate presentation of Wireless Consumer, Wireless Business, Wireline Consumer
Markets, Wireline Business Solutions, Other Wireline, Advertising Solutions, International, Sterling and Customer Information Services/Other.  Please provide an analysis for March 2009 similar to that requested above for December 2008.

Response:

We believe that our current reporting of our segments, Wireless, Wireline, Advertising Solutions and Other, is the most accurate reflection of how we run our business.  It is the basis on which resource allocation is made and how performance is assessed, including benchmarking against other public companies.  In the
following paragraphs, we address the questions raised by the Staff after their review of the previously provided reports. The reports submitted to the Staff contain information provided not only to our chief operating decision maker (CODM), but also information that is used by other key officers.  Some of the information contained therein is provided for the benefit of those individuals and is related to sales channels rather than as a basis
for evaluation and allocation of capital.  This may have inadvertently created the appearance of more segments than used by the CODM to assess performance and allocate resources.

For us, the unifying characteristic around which our wireless and wireline segments operate is the largely separate wireless and wireline networks through which we provide service to our various customer classes.  While technology is progressing towards a more integrated network that may become less identifiable as wireless or
wireline, that development is in the preliminary stages. While there is tracking and reporting of some activity by customer class, it does not represent the levels at which decisions are made to allocate resources.  For example, capital investment (such as capital expenditures and acquisitions) in either the wireline and wireless networks is with a focus on providing nationally based service offerings from each of our wireline and wireless businesses.  More specific examples are the decision
to build a national next generation wireless network (4G) and the wireline project Lightspeed which upgrades the existing wireline network to offer additional services while still providing existing services.

For each of the periods in question, the following shows how we applied the criteria of FAS 131 in determining our segments.

For 2008, the Staff inquired as to whether certain customer classes should qualify as segments, listing 13 such “potential” segments (italicized below), all in addition to “parent” functions.  Following are descriptions as to how we view those items.

Northeast Wireless, Southwest Wireless, Central Wireless, West Wireless:  These were regional customer groupings of our overall wireless operations, included so the head of our wireless operations could see in one place how those regions fit in the total
consolidated picture.  The regions operated with large portions of their rate plan offerings controlled by a central wireless authority and provided on a national basis to customers in each sales region.  Additionally, we have consistently and historically managed the spectrum licenses on a nationwide basis, making decisions on purchases, dispositions and enhancements based on benefit to the entire wireless customer base.  With the fair value of the licenses (representing a major
asset of the business) being evaluated on a nationwide basis, it would be significantly less meaningful to attempt to evaluate goodwill, which represents a residual asset, on anything other than a nationwide basis.

It should also be noted that headquarters’ decisions provide each region with very similar characteristics including a) development of many national rate plans and devices, b) central management of the network, c) common offerings to both consumer and business customers, d) a combination of company owned and agent stores as well
as a centrally managed website (from which customers in any part of the country can order or change service and products), and e) a regulatory environment primarily managed by the Federal Communications Commission.

From Bates numbered page 00010, an operating contribution margin of the regions is readily calculated, although the presence of a relatively notable “Other and Eliminations” component tends to show the regions as each having a larger margin than the consolidated wireless operations.  For 2007, one region had a higher
margin (of more than 25%) while the other three regions operated within a narrow range of margins of between 18% and 21%. Contributing to the lower margins in the three regions was higher costs associated with maintaining a TDMA network (as more of that duplicative network existed in those regions) while our national strategy of a more uniform 3G network was being rolled out.  Maintaining the TDMA network was in compliance with federal requirements and represented a wind down rather than an active management.
Excluding this, all four margins would have been similar.  The margins for 2008 ranged between 23% and 27%, a fairly tight range.  All of these performance similarities reflect the national management of the network, development of national rate plans and nationwide retail sales channels and demonstrate that our wireless business is run nationally.

Consumer Markets (Wireline), EBS, Wholesale, Regional Business Markets, Network Services and Operations Support:  The first four areas mentioned, (consumer, EBS, wholesale and regional business markets) represented sales channels rather than full and complete
segments.  As reported for 2008 and shown on Bates 00010, those channels had operating contribution margins that did not include large portions of network costs which are essentially the costs of providing all of the services, and therefore represent a very incomplete view of our wireline business.  For three of those units, the amount of “missing” costs was so extreme that the units appeared to have margins in excess of 70%--margins which not only do not have relevance in viewing
overall performance, but also would have been highly misleading if reported as a segment. With regard to Network and Operations Support, while it provided services to each of the sales channels, there were no “sales,” no “transfer prices.”  Paragraph 79 of FAS 131 discusses “components that sell primarily or exclusively to other operating segments,” and paragraph 80 notes that “the Board considered an approach that would have required separate reporting of vertically
integrated segments only if transfer prices were based on quoted market prices…”  Both paragraphs place some emphasis on the selling of services or on transfer prices, neither of which was included in our internal management of the business.  For 2008, we viewed the performance of the wireline business and made capital allocation decisions only on the complete operations; i.e., including network costs with sales channels operations.

Advertising Solutions: We did consider Advertising Solutions to constitute a separate segment.

International:  This represented our management of substantially all of our international equity investments.  As equity investments, operating revenue was nominal, far less than 1% of consolidated revenues, with the vast majority of the earnings
coming from equity earnings.  We did disclose and discuss the results of our major equity investments in