AT&T’s report of mixed results in the first three months of 2016 contributed to a slight drop in its stock price in post market trading, even though earnings beat Wall Street’s expectations.
The company reported net profits of $3.8 billion, up 15.2% vs the same period last year. Revenues, with the addition of DirecTV, were up more than 24% to $40.5 billion — right where analysts expected. Adjusting for one-time expenses, earnings hit 72 cents a share, beating forecasts for 69 cents.
AT&T says that DirecTV added 328,000 subscribers, although the company total — including U-verse – declined by 54,000.
“We’re seeing good momentum with our initial integrated wireless, video and broadband offers,” CEO Randall Stephenson says. “And we’ll expand the integrated choices for customers in the fourth quarter when we launch our new video streaming services.”
He adds that he expects to see at least $1.5 billion in savings and other synergies from DirecTV by year end.
The addition of the satellite service helped to increase Entertainment Group revenues 124% to $12.7 billion. Operating income, at $1.6 billion, improved from last year’s loss of $264 million.
The company says that if you include DirecTV in last year’s numbers, revenue would still have increased more than 3%.
CFO John Stephenson says that plans for three DirecTV-related streaming services are “on target for launch in the second half of the year” as the company continues to negotiate licensing terms with studios.
He says the upcoming DirecTV Now — a streaming service with many of the channels offered on DirecTV — shouldn’t cannibalize the satellite offering. It will attract Millennials, while DirecTV appeals to “high end” customers who have “three or four televisions connected….We’re talking about growing the market.”
The drop in U-verse customers also doesn’t reflect a shift to DirecTV. “The sales channel has been focusing on selling [DirecTV] satellite service because it’s a lower cost structure,” Stephenson says. “We can get content synergy savings by adding a customer there….It’s [about] getting new customers on to DTV.”