AT&T Pinched by Cord-Cutting and Closed Theaters
October 22 2020 - 7:16AM
Dow Jones News
By Drew FitzGerald
AT&T Inc.'s legacy television business continued to lose
customers during the third quarter while its movie business was
sapped by the pandemic and new media bets struggled to gain
steam.
The telecom and media giant said Thursday that 8.6 million
customers had activated HBO Max, its Netflix-like streaming video
service, by the end of September, trailing rivals like Disney+ and
Hulu. The overall number of customers watching HBO in any form rose
to 38 million in the U.S. and 57 million world-wide, exceeding the
company's target for the year.
AT&T's bigger satellite-and-cable division lost 627,000
video customers over the same period. The network operator's
DirecTV unit has suffered the lion's share of cord-cutting in
recent years, prompting the company to explore a sale of the
satellite business.
The wireless business, which remains the heart of AT&T's
profit engine, added 645,000 postpaid phone subscribers. The
company counted 151,000 subscribers retained under the Keep
Americans Connected program as active customers even if they were
behind on their bills.
Rival Verizon Communications Inc. on Wednesday posted a net gain
of 283,000 postpaid phone subscribers. Verizon didn't specify the
number of delinquent accounts included in that total, making
comparisons difficult.
New home-internet accounts also helped blunt the impact of
AT&T's pay-TV losses. The company reported a net gain of
158,000 broadband subscribers, a figure that included 104,000
accounts on a Keep Americans Connected plan.
AT&T's overall quarterly profit fell to about $2.8 billion,
or 39 cents a share, compared with about $3.7 billion, or 50 cents,
a year earlier. The result included about 21 cents a share of costs
tied to the Covid-19 pandemic. Revenue fell to $42.3 billion from
$44.6 billion a year earlier.
The company attributed a roughly $2.5 billion revenue loss to
Covid-19 as theater closures shrank box-office receipts from Warner
Bros. movies and wireless roaming fees dried up.
The result prompted AT&T to tweak its full-year cash-flow
projections. The company said it expects free cash flow to reach
$26 billion or higher with its dividend payout ratio in the high
50% range. That rate would support the nearly $15 billion in annual
dividend payments projected earlier this year, before the
coronavirus pandemic forced the company to withdraw its earlier
forecasts.
AT&T is counting on HBO Max to offset its declining
entertainment assets with new income from a growing
direct-to-consumer model. HBO's existing cable-TV and online
distribution model has complicated that pivot.
Some current HBO viewers remain unaware that their subscriptions
entitle them to the new content-heavy app, while others are unable
to upgrade because of business disputes that have kept the service
off Amazon.com Inc. and Roku Inc. devices.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
October 22, 2020 07:01 ET (11:01 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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