AT&T took a $15.5 billion write-down on its declining premium video business in the fourth quarter, as the telecom company closes in on selling a chunk of its declining DirecTV satellite unit to private equity firm TPG.
The move pushed AT&T into the red in Q4, with the company reporting a $13.89 billion loss for the period, despite impressive customer metrics in its core business, wireless, as well as new businesses, such as the HBO Max streaming service.
AT&T lost another 617,000 customers across its bundled “premium” video services. That was an improvement on the 948,000 lost in the fourth quarter of 2019, but AT&T seems intent on shifting away from bundled linear pay TV, nonetheless.
Beyond moving to sell DirecTV, AT&T also recently rolled in its virtual MVPD service, AT&T Now, into its IP-delivered pay TV service, AT&T TV.
Also read: AT&T Close to Selling DirecTV Minority Stake to TPG: Report
“We have been debating how we want to set up operations for video for some time,” AT&T CEO John Stankey said during his company’s fourth-quarter earnings call with investment analysts Wednesday. “We figure we’re at a lifecycle change for these products … We all know about the declines in the pay TV market, and we’re also seeing it disconnected a little bit from broadband. It’s a fairly mature offering.”
AT&T paid around $66 billion for DirecTV, factoring in acquired debt, just five years ago. But the telecom said that the leased equipment, truck rolls, hidden charges and contractual obligations of traditional linear pay TV no longer support its primary agenda of delivering broadband connectivity to its customers through light "virtual add-on" services.
Churn on postpaid wireless phone subscriptions just reached their lowest point in a decade, AT&T said, with wireless revenue spiking 7% in Q4 to $20.1 billion. The company also added 270,000 wireline fiber internet customers in the fourth quarter and has now surpassed 5 million fiber customers.
Notably, Stankey said AT&T is committed to building out fiber to 2 million more homes in 2021.
In video, the company’s nine-month-old HBO Max SVOD service just had its best quarter yet, adding 7 million customers. AT&T’s WarnerMedia division now has over 17 million of its 41.5 million HBO customers converted to the new app-based HBO Max service. And it’s about to expand HBO Max to Europe and Latin America.
HBO Max fits the bill of the kind of “virtual add-on product” AT&T is looking for as it seeks to proliferate its wireless 5G and fiber wireline sales. The same could be said about AT&T TV, a new pay TV service delivered over the internet launched by the telecom last year.
DirecTV? Not so much.
