AT&T misses on revenue; loses more DirectNow customers

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It’s not easy to be a media conglomerate and telecom powerhouse. That’s the reality for AT&T.

On Wednesday, the company disappointed Wall Street analysts by missing revenue expectations in spite of gains in new wireless subscribers and a strong media and entertainment business. It also announced continued subscriber losses in its DirecTV Now streaming service.

The main takeaway is that AT&T is facing intense competition in both its wireless and video services, where attracting and keeping customers, while also making sure you’re not giving away too much of your profits to keep and retain them, is key to success.

But the bright spot for the company comes once again from its WarnerGroup entertainment properties, acquired last June from Time Warner Media. This business, which includes its movie studios and cable channels like HBO, with hit shows like “Game of Thrones” is the gift that keeps on giving.

The Results

For the first quarter, the No. 2 wireless carrier in the nation reported a surprise gain in the first quarter of new wireless customers, who pay bills monthly. In total, it added 80,000 new postpaid phone subscribers in the quarter. This was the first quarter in five years that the company added these valuable customers to its roster.

But those gains came at a hefty price, as the company used price-cut promotions to attract new subscribers. These cuts ate into the company’s revenue, which missed Wall Street expectations. Total revenue was up to $44.83 billion from $38.04 billion, but it fell short of the $45.11 billion that analysts had expected, according to Yahoo Finance.

There were some other trouble spots in the company’s earnings report, as its video service DirecTV Now lost 83,000 subscribers in the quarter, which follows a loss of 267,000 subscribers in the fourth quarter of 2018.

DirecTV Now finished out 2018 with 1.6 million subscribers and at the end of March it had 1.5 million. AT&T also said it lost 544,000 traditional pay TV subscribers in the first quarter from its DirecTV satellite business and its AT&T U-verse services. It now has 22. 4 million TV subscribers.

But because the company jacked prices on its subscription services, it was able to increase revenue per subscriber across all of its TV products with so-called ARPU (average revenue per user) up more than $10 on the DirecTV Now streaming product as compared to the same quarter a year ago.

The silver lining in the company’s report came from WarnerMedia Group. It’s revenues of $8.4 billion were up a little more than 3% compared with the same quarter last year as the company continued to see revenue gains from it big holiday blockbuster “Aquaman.”

The company also noted that HBO’s “Game of Thrones” premiere broke records for viewership, and another superhero blockbuster, Shazam! has already grossed more than $300 million worldwide.

All in all, Randall Stephenson, AT&T’s chairman and CEO said in a press release that he feels confident about the company’s prospects for the year. After touting some key achievements in the quarter he said, “All this speaks volumes about our focus on our strategic priorities and our ability to grow our mobility, WarnerMedia and emerging Xandr [advanced advertising and analytics] businesses. Our teams are executing well and have turned in a good performance to start the year.”

The company’s stock was trading down 2.2% to $31.39 in pre-market trading.

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