AT&T Sales Rise; Video Effort Lags -- WSJ
July 22 2016 - 03:03AM
Dow Jones News
By Thomas Gryta
AT&T Inc.'s quarterly profit and revenue got a lift from its
acquisition of DirecTV but the company reported declining numbers
of core wireless phone and pay television connections.
A year after closing its $49 billion acquisition of DirecTV,
forming the biggest U.S. pay television operator, the company said
cost savings from the deal are ahead of its plans. It lost 49,000
U.S. television subscribers in the second quarter but an executive
said the company still expects to end the year with a net gain.
AT&T has been pushing its nationwide DirecTV satellite
service and de-emphasizing its old U-verse service that operates in
a 21-state footprint. In the second quarter, 391,000 households
left U-verse, compared with the 342,000 that joined DirecTV. The
company said about 80% of its 25.3 million television connections
are now on the DirecTV service.
"We would expect to see some improvement on both sides," Chief
Financial Officer John Stephens said on a conference call Thursday.
He said the second quarter is traditionally slow for the pay-TV
business.
Mr. Stephens expects to benefit from National Football
League-related subscriptions and other offers in the second
half.
The company said it is on track by year-end to cut $1.5 billion
or more in annual expenses from the combined business.
The DirecTV deal diversified the telecom giant away the
competitive consumer wireless market, where AT&T has been
focused on retaining its most profitable customers and shying away
from promotional offers to grab market share. The wireless business
lost 180,000 mainstream phone connections in the second quarter
while wireless service profit margins improved to 49.8% from 48.5%
a year ago.
Phone additions are considered important because they provide
more service revenue than tablets, and customers with postpaid
phone accounts tend to stay longer. Overall, mainstream
connections, including tablets, rose 256,000 in the quarter, ending
the period at 77.3 million.
Mr. Stephens said most of the lost phone connections were from
so-called feature phones -- as contrasted with smartphones -- with
an average revenue per user of about $35 a month. Overall, its
mainstream wireless customers bring in about $55 a month.
Churn, the monthly cancellation rate, for mainstream customers
dropped to just 0.97% from 1.01%.
AT&T's quarterly financial results have made for difficult
comparisons to prior periods because the company reorganized
reporting structures after the DirecTV deal. Total wireless revenue
on a comparable basis dropped 2% in the quarter to $17.93
billion.
Overall, AT&T reported a profit of $3.41 billion, or 55
cents a share, up from $3.08 billion, or 59 cents a share, a year
earlier. Excluding items, profit per share rose to 72 cents from 70
cents. Revenue was $40.52 billion, up 23% from a year-ago period
that didn't include DirecTV.
Shares of AT&T, which have rallied 24% so far this year to
levels not seen in more than a decade, were 0.4% lower in
after-hours trading to $42.33.
Lisa Beilfuss contributed to this article.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
July 22, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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