April 22, 2020
AT&T had a problem with pay-TV subscriber retention before the pandemic. First-quarter fiscal results (ended March 31) suggest COVID-19 hasn’t spared the telecom, with management saying the virus cost upwards of 5 cents-per-share in pre-tax earnings, or about $360 million.
AT&T said it lost 897,000 pay-TV subscribers in the quarter, which include DirecTV and U-verse. It also lost 138,000 over-the-top video subs, which includes recently launched AT&T TV. The company ended the quarter with just 788,000 streaming video subs compared to 1.5 million a year ago. Pay-TV subs totaled 18.5 million compared with 23.4 million last year — a loss of 4.9 million subs over the past 12 months.
“It’s impossible to state the impact COVID-19 is having on all of us,” CEO Randall Stephenson said on the fiscal call. AT&T contends 60% of revenue and 70% of pre-tax earnings come from the company’s core communication business, including enterprise network, broadband and wireless.
“These businesses have proven to be resilient and they help provide a recurring stream of revenue and solid cash flows even in times of economic stress,” COO John Stankey said.
“Without [COVID-19], the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable [pre-tax] earnings and margins,” Stephenson said in a statement.
The executive said AT&T maintains a strong cash position and balance sheet, with core businesses continuing to generate free cash flow — even in today’s environment.
“In light of the pandemic’s economic impact, we’ve already adjusted our capital allocation plans and suspended all share retirements,” Stephenson said. “As a result, we’re able to continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining our dividend commitment and paying down debt.”
Regardless, CFO John Stephens said AT&T expects increased cord cutting among pay-TV subscribers, in addition to lower revenue from hospitality businesses such as hotels, bars and restaurants.