AT&T just sent a potentially worrisome signal about pay TV distributors’ performance in Q2 with a report saying that DirecTV and U-verse lost 351,000 subscribers in the period — more than many analysts expected.
DirecTV shed 156,000 subs to end the period with 20.9 million, while U-verse lost 195,000 ending with 3.8 million. But the telco says the numbers were somewhat offset by a gain of 152,000 DirecTV Now subscribers, bringing the streaming service to “nearly 500,000.”
And the overall results for AT&T were better than the Street anticipated — helping to lift shares by 2.7% in postmarket trading.
The company reported net income of $3.92 billion, up 14.9% vs the period last year, on revenue of $39.8 billion, down 1.7%. The top line matched analysts’ expectations, and adjusted earnings at 79 cents a share beat Street predictions for 74 cents.
“In a quarter where our competitors used promotions aggressively,” CEO Randall Stephenson said, “we added more than 500,000 branded smartphones to our base and more than 100,000 IP broadband subscribers, achieved record EBITDA wireless margins and had the lowest postpaid phone churn in our history.”
He added that AT&T’s $85 billion acquisition of Time Warner still should “close by year-end and further transform the company.”
The video results partly reflect the company’s aggressive marketing of DirecTV Now in the quarter. It gave steep discounts to some AT&T Wireless customers, offered a free Roku box to those paying for two months of service and teamed with Best Buy to offer DirecTV Now for free for a month to those buying some streaming devices.
The Entertainment Group’s operating revenue fell slightly to $12.7 billion, while EBITDA slipped a hair to $3.12 billion. AT&T said gains in DirecTV video revenues and in the company’s broadband sales offset “TV content-cost pressure, declines in legacy services and start-up costs for DirecTV Now.”