AT&T’s Online-TV Service Ends Streak of Subscriber Losses

  • AT&T had lost 479,000 pay-TV users from March ’15 to Sept. ’16
  • DirecTV Now benefited from $35-a-month promotion in the period

AT&T Inc. signed up new pay-TV customers for the first time in seven quarters thanks entirely to its new live online video service, DirecTV Now.

The service, which targets consumers who don’t subscribe to traditional TV, helped woo at least 200,000 video subscribers in the fourth quarter and offset a loss of satellite-TV customers, according to a filing Friday of preliminary results. Analysts were expecting 61,000.

The gain reflects an aggressive, short-term promotional offer of $35 a month for 100-plus channels. AT&T introduced DirecTV Now in November, and now charges $60 a month for a similar number of channels.

Though AT&T is the largest pay-TV provider in the U.S. with more than 25 million subscribers, the company’s video business has been in decline. AT&T had lost 479,000 subscribers from March 2015 to September 2016 as its satellite and U-verse TV businesses faced competitive pressure from web rivals including Netflix Inc. and Amazon.com Inc. 

If DirecTV Now is successful, the company plans to use the online format as its primary platform for new TV customers in the next three to five years. The phone giant recently struck a deal to buy Time Warner for $85.4 billion, potentially gaining ownership of the Warner Bros. studio, HBO and Turner Broadcasting.

Shares of AT&T rose 1.7 percent to $41.68 at 9:58 a.m. in New York Friday.

Wireless Gains

Also in the quarter, AT&T signed 500,000 new monthly wireless subscribers, beating analysts’ projections for 385,000, according to data compiled by Bloomberg. The No. 2 U.S. wireless carrier added 526,000 new users a year earlier. The Dallas-based company posted the gains even after shutting down parts of its older cellular network, which meant shedding 700,000 customers -- about 50,000 of which were monthly customers.

The results show AT&T’s reliance during the competitive holiday period, where carriers like Verizon Communications Inc. and T-Mobile US Inc. offered steep discounts on new phones with trade-ins. T-Mobile, which uses free video streaming and data rollover to attract users from rivals, is projected to have added 1.2 million new wireless subscribers, according to data compiled by Bloomberg.

AT&T, which is scheduled to report full fourth-quarter results on Jan. 25, also expects a non-cash, pre-tax loss of $1 billion in pension re-measurement.

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