Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

AT&T Inc. reminded us Tuesday that it's expanding deeper in video entertainment not because that portion of its business is doing so well, but because it isn't. 

Even as it reported a surprise gain in wireless customers, AT&T said it lost 199,000 video subscribers in the second quarter -- just two years after acquiring the DirecTV satellite-television business for $67 billion. It's more evidence that diversification isn't a cure-all for telecommunications and media companies desperate for new growth avenues, even if exploring cross-industry tie-ups makes sense in theory.

Switching Channels
AT&T is losing TV customers. Can buying networks such as HBO change that?
Source: Bloomberg

The wireless carrier is trying morph into an entertainment juggernaut with its pending $109 billion takeover of Time Warner Inc., owner of the HBO, TBS and CNN networks. The hope is that with this content in its hands, AT&T will be able to offer more compelling packages to stop wireless and video customers from fleeing. It says the new DirecTV Now streaming app is already helping to offset cord-cutting. Still, the margins on these cheaper offerings simply don't compare.

CEO Randall Stephenson's vision for AT&T is certainly intriguing. The latest batch of TV defections adds fresh urgency to the need to carry it out.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net