T AT&T Inc

By Drew FitzGerald and Kimberly Chin 

AT&T Inc.'s pay-TV subscriber base continued to erode during the first quarter, adding pressure on the telecom and media giant's project to develop a new streaming service aimed at cord-cutters.

The Dallas company reported a net loss of 544,000 "premium" TV customers, a category that includes DirecTV satellite subscriptions and U-verse fiber optic packages, during the first three months of the year. The online cablelike service DirecTV Now shed 83,000 customers.

The reported pay-TV losses would have been even deeper were it not for a change in the way AT&T records disconnections. The company said it now counts severed accounts based on billing cycles, a change that boosted total pay-TV subscriptions by 117,000. All told, the company ended the quarter with 23.9 million pay-TV connections.

"We'll continue to see declines in traditional TV subs, particularly those areas where we can't bundle with broadband," Chief Executive Randall Stephenson said in a conference call with analysts. "You'll see subscriber losses should lessen as we get into 2020."

In its wireless business, AT&T said it added 80,000 more "postpaid" phone subscriptions, a valuable category of customers who tend to stick around longer. Rival Verizon Communications Inc. said Tuesday it lost 44,000 such connections. The customer gains boosted earnings despite declining revenue from smartphone upgrades, which hit a "record low" during the quarter. Cellphone users have been holding on to their devices for longer, a trend that has forced carriers to adapt.

Overall, merger-amortization costs and integrated-relation expenses weighed on its profit for the quarter ended March 31. Net income attributable to AT&T totaled $4.01 billion, or 56 cents a share, compared with $4.76 billion, or 75 cents a share, a year earlier. Analysts polled by Refinitiv expected 60 cents a share. Meanwhile, adjusted per-share earnings were 86 cents, in line with analysts' expectations.

Consolidated revenue jumped 18% to $44.8 billion, primarily from its Time Warner acquisition.

AT&T closed its purchase of the owner of Warner Bros., HBO and a suite of cable channels including CNN last year after a protracted antitrust battle with the U.S. Department of Justice. The business, renamed WarnerMedia, added $1.2 billion in operating income to the bottom line last quarter.

Results in the company's media division benefited from cost cutting and higher revenue from Warner Bros.-produced TV series and movies, including continuing box office sales from "Aquaman."

WarnerMedia is building an on-demand streaming video service expected to launch in "beta" mode near the end of this year. The still unnamed service, which wouldn't carry the live sports and news available on DirecTV Now, is slated to join an increasingly crowded market for internet-based entertainment that includes new offerings from Walt Disney Co. and Apple Inc.

"The Disney announcement gave us nothing but more optimism in terms of what we'll be able to bring to market," Mr. Stephenson said Wednesday. WarnerMedia plans to reveal more details about its plans in September or October.

Shares of the company fell about 3% in early trading. The stock is still up nearly 10% this year.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

April 24, 2019 10:09 ET (14:09 GMT)

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