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AT&T Offers 'Mixed Bag' in Q1

Video customer losses continued to mount at AT&T in the first quarter, with 627,000 DirecTV, DirecTV Now and U-verse TV subscribers heading for the exits as the telecom giant focuses on more profitable customers.

AT&T said it shed 544,000 premium TV subscribers and lost 83,000 DirecTV Now customers in the period. The telco now has 22.4 million premium TV customers — mainly DirecTV satellite and U-verse telco-TV subscribers — and 1.5 million DirecTV Now virtual MVPD customers.

The premium TV losses were ahead of some analyst estimates, while the DirecTV Now losses were better than some expected. In a research note, Evercore ISI media analyst Vijay Jayant said he had expected premium TV losses to be about 300,000, and anticipated DirecTV Now shedding about 100,000 customers.

The DirecTV Now losses add to the 267,000 customers the streaming service lost in Q4, after it ended heavy promotions and raised prices. 

AT&T said average revenue per unit (ARPU) at DirecTV Now has risen by more than $10 year-over-year.

Revenue at AT&T Entertainment Group was down 1% to $11.3 billion but earnings before interest, taxes, depreciation and amortization (EBITDA, a measure of cash flow) increased by 6.9% to $2.8 billion.

Jayant was pleased with the better than expected cash flow growth -- he said the results were 21% ahead of his forecast -- noting that the performance was driven by better than expected cost containment. Operating expenses were down about 3.2% year-over-year, partly attributable to one-time content cost benefits and a change in subscriber life, which lowered deferral amortization.

Jayant called the Q1 results a “mixed bag,” adding “Entertainment EBITDA looks good, but how much is one-time.”

At WarnerMedia, revenue rose 3.3% to $8.3 billion in the quarter and operating income was up 11.6% on a pro-forma basis.

Overall, total revenue of $44.8 billion was up nearly 18%, mainly due to the purchase of Time Warner last year. Net income was down 12.1% to $4.1 billion.  

“Our first-quarter results show that we’re delivering on what we promised,” AT&T chairman and CEO Randall Stephenson said in a press release. “We’re on plan to meet our de-leveraging goals with strong free cash flow and asset sales. We grew Entertainment Group EBITDA in the quarter and are confident we’ll meet or exceed our full-year target. ... All this speaks volumes about our focus on our strategic priorities and our ability to grow our Mobility, WarnerMedia and emerging Xandr businesses. Our teams are executing well and have turned in a good performance to start the year.”