AT&T's Pay-TV Subscribers Continue to Flee -- 2nd Update
April 24 2019 - 12:59PM
Dow Jones News
By Drew FitzGerald and Kimberly Chin
AT&T Inc.'s pay-television subscriber base continued to
erode during the first quarter, adding pressure on the telecom and
media giant to develop a new streaming service aimed at
cord-cutters.
The Dallas company reported a net loss of 544,000 so-called
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.
Shares in AT&T were off about 4% at $30.77 at midday
Wednesday. The stock is still up about 8% this year.
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."
Despite those customer defections, the division that holds
DirecTV improved its profitability. The unit, which also includes
home and business landline service, lifted operating income 4.8% to
$1.48 billion by gaining 45,000 home broadband customers and by
keeping a tighter lid on expenses. The reversal put the company on
track to meet its goal of stabilizing earnings in the division,
which suffered deep losses in 2018.
Wireless operating income also improved. AT&T said it added
179,000 more "postpaid" phone subscriptions, a valuable category of
customers who are billed for monthly service after use -- and 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 net income attributable to AT&T was $4.01 billion,
or 56 cents a share, down from $4.66 billion, or 75 cents a share,
a year earlier, because of merger- and integrated-related
costs.
Consolidated revenue increased 18% to $44.8 billion, primarily
from the company's 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. Justice Department. 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."
Earnings from HBO also increased despite a continuing dispute with
Dish Network Corp. over carriage terms that hurt subscription
revenue.
WarnerMedia is building an on-demand, streaming-video service
expected to launch in so-called 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.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and
Kimberly Chin at kimberly.chin@wsj.com
(END) Dow Jones Newswires
April 24, 2019 12:44 ET (16:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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