AT & T Entertainment, Wireless Offset Satellite Dip
AT & T Inc.'s new show-business assets expanded its major telecommunications divisions in the last quarter, which boosted earnings despite a record decline in satellite TV subscriptions.
Dallas company's third quarter earnings increased to $ 4.72 billion, helped by customer growth in its mobile phone business, more subscribers to HBO and growing distribution revenues from its slate of Turner TV channels.
But the company lost a record 359,000 DirecTV satellite customers in the quarter, which dwarfed 13,000 video subscriber extensions on Uverse and 49,000 new DirecTV customers. Now, a cable-based bundle channel is offered online.
DirecTV Now, growth has slowed sharply after signing hundreds of thousands of new customers in previous quarters. Part of it was due to a new strategy to avoid chasing retailers who use the service for a few months to follow a particular TV series or sport.
"We take a more tailored, computerized approach" AT & T Communications Chief Executive John Donovan said at a conference call with analysts, referring to DirecTV Now. "We have learned a lot of our two million customers about customer behavior and price elasticity."
Shares dropped 6.1[ads1]% to $ 31 Wednesday. The stock is more than 20% this year.
AT & Ts core business has received 69,000 subscribers to postpaid phone plans, which many investors consider as a barometer for wireless profitability. The company added 481,000 net prepaid phone subscribers. Total domestic prepaid and backed subscribers reached 93.9 million, up from 93.6 million in the previous quarter.
Following similarly strong results on rival Verizon Communications Inc., which said on Tuesday that the network had net 295,000 new pay-back telephone connections in the same period. Most mobile operators have avoided offering deep discounts on wireless plans this year and have reported stronger profits as a result of this.
Phone plans and internet services still have the bulk of AT & Ts profits, although the company has aggressively focused on advertising and entertainment. In June, it used more than $ 80 billion to the owner of the Warner Bros. studios and a slate of popular TV channels like CNN, HBO and TBS. AT & T renamed WarnerMedia.
The three months ended September 30th were the first full quarter of the telecom company's ownership and helped raise the bottom line. Operating revenues increased 11% due to HBO subscriber growth and increased 13% on Turner TV, thanks to stronger subscriptions from cable and satellite providers.
AT & Ts's total profit increased to $ 4.72 billion, or 65 cents per share, up from $ 3.03 billion, or 49 cents a share it earned a year earlier without WarnerMedia. Revenue climbed to $ 45.74 billion from $ 39.67 billion a year ago.
CEO Randall Stephenson told investors in September that loss of pay-TV subscribers appeared to be flat after a year of steep decline, although he said the tabmaking division does not keep DirecTV stabilized next year.
Traditional TV channel subscriptions are falling all over the world, as more viewers switch to cheaper packages on the web, or release live TV completely. These packages tailored for "snare carriers" tend to be less profitable for their suppliers than satellite and cable.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
