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In T's case, I'd say that COS definitely includes the first 2 items.
 It may well include the third (I'd have to look at the annual
 report to have a better idea, but I suspect that the bulk of
 depreciation and amortization relate to the revenue generation
 activities. 

 Access and other interconnection
 Network and other communications services
 Depreciation and amortization


Phil - thanks for the info!

I did use all three of these metrics in re-calculating
AT&T's COGS (to err on the side of conservatism) and
they still came out pretty darn good:

                            1998      1997
--------------------------------------------
Gross Margins:               43%       41%
Net Margins:                 12%        9%
Cash to Debt:                .47       .03 (ugh! but they did just go on a buying spree!)
Flow Ratio:                  .77      1.24

Most importantly, all these figures are improving
over time...

What I like the most when I look at T's business model
is that they are making tons of cash on so many 
different fronts... and with the recent acquisitions 
of TCI and MediaOne they are now a cable powerhouse...
They now have a virtual stronghold on this whole
"convergence" thing... bringing phone, Internet, and
TV to your home with one cable and one bill (now
that's convenience!).

All this and rising margins! What do other Fools think?
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