AT&T expects to lose about 1.1 million TV customers in the third quarter as it faces pressure from an investment group that says AT & T's increased focus on the TV business was a huge mistake.
In an update to shareholders yesterday, AT&T CFO John Stephens said "the company expects a step-by-step 300,000 to 350,000 premium video loss over last quarter's premium video results," according to AT&T. Since there was an increase compared to the loss in the previous quarter, it will amount to a three-month loss of more than 1
In Q2 2019, AT&T reported a net loss of 778,000 subscribers in the "Premium TV" category, which includes DirecTV satellite and U-verse cable TV services. Since AT&T expects to lose that number of subscribers plus another 300,000 to 350,000, the update to shareholders suggests that the loss in the third quarter in the category will be between 1,078,000 and 1,128,000 subscribers. (A spokesman for AT&T confirmed to Ars that an estimated loss of 1,078,000 and 1,128,000 subscribers in the third quarter is accurate.)
AT & T & # 39; s update to shareholders attributed the expected loss to "aggressively dealing with chargeback costs, resulting in content providers' yields and from limiting campaign pricing. "AT&T said it's been" keeping a tight line in negotiations "with programmers to control costs, but the resulting channel blackouts drive TV subscribers away.
The estimated loss does not appear to include AT&T TV Now (formerly known as DirecTV Now), an online service that AT&T did not include in the Premium TV category in the earnings reports. AT&T also lost 168,000 subscribers to DirecTV Now / AT&T TV Now in the second quarter, but it did not say how that service will perform in the third quarter.
Including both premium TV and the streaming service, AT & T's total number of video subscribers dropped from 25.4 million in Q2 2018 to 22.9 million in Q2 2019. The total would drop to about 21.8 million after third quarter if AT&T TV now stays steady.
AT&T focused on declining TV business
Pay TV business has struggled in the face of competition from online streaming. Despite that, AT&T made a big effort on video in recent years, buying DirecTV in 2015 and Time Warner Inc. in 2018.
To get back on track, AT&T is banking on its new AT&T TV streaming service, which is different from AT&T TV Now despite having an almost identical name. Unlike AT&T TV Now, AT&T TV has two-year contracts, prices that increase automatically after a year, activation fees and early termination of service, a regional sports fee and "certain other additional fees and fees."
It is not clear to us why customers who dictate DirecTV or U-verse would be tempted by a streaming service that recreates the annoyances and pricing structure of traditional cable and satellite TV services. But AT&T said that by 2020, "they expect premium TV subscriber trends to improve due to far fewer customers at promotional prices and the nationwide launch of AT&T TV, which delivers a premium streaming experience."
AT&T said that 2020 performance should also be helped by higher revenue per customer because it limits the discounts available to subscribers.
But that doesn't say much. At its current pace, AT&T could significantly improve the subscriber trend and still lose hundreds of thousands of TV customers every quarter.
Investor blows AT&T TV strategy
AT & T's TV strategy was criticized this week in an open letter by activist investor Elliott Management Corp., which has a $ 3.2 billion stake in AT&T.
"Despite the AT&T management's claims that" Pay TV is a very good, sustainable business "when the [DirecTV] transaction was announced, the pay TV ecosystem has been under tremendous pressure since the agreement was concluded," "In fact, trends continue to erode, with AT & T's premium TV subscribers experiencing a sharp decline as the industry, especially the satellite, struggles sharply. Unfortunately, it has become clear that AT&T bought DirecTV at the absolute top of the linear TV market. " Elliott Management is also skeptical of the Time Warner acquisition." [D] eats nearly 600 days between signing and closing (and more than one year ago), AT&T has not yet formulated a clear strategic rationale for why AT&T needs to own Time Warner, "the open letter states.
Including debt, buying DirecTV cost $ 67 billion and Time Warner cost $ $ 109 billion
The open letter stated that AT&T is moving too far away from its core telecommunications business, and criticized the company for not performing as well in wireless industry as Verizon. Elliott Management asked for "significant operational improvements" about AT&T has "the right mix of management in the company." AT&T should consider disposing of DirecTV and other non-core businesses, the open letter states.
AT&T gave a short answer and said that laughing the sub-team and the board "will review Elliott Management's perspectives in the context of the company's business strategy. "However, AT&T defended its strategy of putting together a" unique portfolio of valuable businesses … across communication networks and media and entertainment. "
" AT&T's board and management team are convinced that the focused and successful implementation of Our strategy is the best way forward to create shareholder value, "the company said.
AT&T stands separately to a class action lawsuit claiming it lied to investors to hide the error in its DirecTV Now streaming TV service.