Spotlight on AT&T's Media Strategy as Wireless Loses Luster
April 22 2017 - 8:29AM
Dow Jones News
By Drew FitzGerald
Unlimited wireless data plans have made a comeback this year,
forcing U.S. carriers to find new ways to set themselves apart from
the competition.
AT&T Inc., the No. 2 wireless carrier by subscribers, is
answering with other services: home television through its DirecTV
and U-verse brands, and, if regulators bless its pending Time
Warner Inc. takeover, discounted access to entertainment on every
screen.
Questions about that strategy will overshadow AT&T's
financial results scheduled for release Tuesday, partly because of
low expectations for its core wireless business. Average revenue
per user, a key measure of phone companies' fundamental health, has
slid industrywide for the past three years, according to investment
bank UBS AG.
It follows rivals Verizon Communications Inc., which last
Thursday reported its first-ever net subscriber loss, and T-Mobile
US Inc., which is expected to report on Monday. Thanks in part to
its own all-you-can-eat data plans, T-Mobile has snapped up many
former Verizon and AT&T customers.
All three companies, as well as No. 4 carrier Sprint Corp., now
offer plans that promise unlimited data usage, a strategy that
could force them to boost spending to keep up with customers'
voracious online habits.
AT&T still spends heavily on network upgrades but has been
conservative of late to preserve its bottom line. The company bid
$910 million in the Federal Communications Commission's latest
auction of spectrum licenses, an amount small enough that the
company recouped most of the multibillion-dollar down payment it
paid to enter the auction.
The auction's end means wireless companies will soon be freed
from legal obligations that prevented them from holding deal talks.
But AT&T's hands are still tied because of its continuing $85
billion bid for Time Warner, a distraction that could keep it on
the sidelines as rivals trade wireless licenses and contemplate
larger moves.
U.S. regulators have approved similar combinations of telecom
and entertainment in the past. But President Donald Trump, a critic
of Time Warner channel CNN, has said during his campaign that the
deal should be blocked.
His nominee to lead the Justice Department's antitrust division,
Makan Delrahim, is awaiting Senate confirmation, so in the meantime
the department has begun sending questions to other telecom and
media companies potentially affected by the combination, according
to people familiar with the matter. That is good news for AT&T,
which can get to work marketing its new shows and cutting costs the
sooner the merger review ends.
Another bright spot AT&T can count on is its advertising
business. The company earlier this year said AdWorks, its ad
division, was generating more than $1 billion a year of revenue and
growing at a double-digit rate.
That alone is hardly enough to rescue the broader company if
customers start to bolt in droves but offers hope for the
future.
Shalini Ramachandran contributed to this article.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
April 22, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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