AT&T Weathers Record Loss of Wireless Users With Forecast IntactBy
No. 2 U.S. carrier expects mid-single digit earnings growth
DirecTV Now streaming service helps offset pay-TV decline
AT&T Inc. maintained its 2017 profit outlook despite losing wireless customers for the first time ever, reflecting rising competitive pressure in the mobile-phone business.
With every major carrier now enticing consumers with unlimited data offers, Dallas-based AT&T shed 191,000 subscribers in the first quarter. Nine analysts surveyed by Bloomberg had predicted a gain of 100,000. The results underscore the company’s strategy to realign the business around media through the $85.4 billion purchase of Time Warner Inc.
Like Verizon Communications Inc., AT&T is fighting to keep and add customers while increasing revenue amid a price war with smaller rivals T-Mobile US Inc. and Sprint Corp. As the wireless industry gets more saturated and consumers also ditch AT&T’s pay-TV services for online alternatives, the results highlight why AT&T Chief Executive Officer Randall Stephenson has been looking to own content rather than just distribute it. The company is now seeking regulatory approval for its acquisition of Time Warner, owner of the Warner Bros. movie studio and TV networks such as TNT and HBO.
The subscriber losses represent the worst collateral damage so far in a prolonged pricing battle with T-Mobile US Inc. and Sprint Corp. All four carriers are now aggressively marketing mobile-phone packages that include unlimited data -- an acknowledgment that consumers want to stream video without worrying about exceeding a cap. Both AT&T and Verizon took the gloves off in the first quarter and competed hard on price -- and lost.
Even with that erosion, AT&T expects mid-single digit adjusted earnings growth this year, compared with analysts’ estimates for 3 percent. The company posted first-quarter earnings excluding some items of 74 cents a share, matching analysts’ predictions. The customer losses still weighed on sales, with the company posting revenue of $39.4 billion, trailing the $40.6 billion estimated by analysts.
The stock was little changed at $40.01 in late trading. The shares seesawed down and up in the minutes after the earnings release as investors sorted through the mixed bag of data.
A big part of AT&T’s transformation strategy hinges on DirecTV Now, an online-video service starting at $35 a month for 60 channels. Though it didn’t disclose subscriber totals for DirecTV Now Tuesday, AT&T said the service helped offset a decline in traditional pay-TV subscribers. The company lost 233,000 landline TV customers, while the number of DirecTV satellite customers was little changed, according to the statement.
AT&T, the largest pay-TV provider in the U.S., ended the quarter with 25 million traditional video subscribers.