AT&T disclosed in an 8-K filing Wednesday that it expects to shed 390,000 “traditional” video subs (DirecTV satellite and U-verse), offset by about 300,000 gains from DirecTV Now, the company’s OTT-delivered (and lower-margin) pay TV service.
RELATED: Moffett Casts More Doubt on Value of DirecTV Now Subs
AT&T, which will come out of Q3 with a loss of 90,000 total video subs, offered a lengthy list of reasons, noting that the reduction in its video base was “driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards.”
RELATED: Comcast's Roberts Tries to Calm Investors
Those results, MoffettNathanson analyst Craig Moffett said in a research note, indicate that AT&T, like its cable peers, “is suffering from the ravages of cord-cutting,” as DirecTV Now additions weren’t enough to completely overcome traditional video subscriber losses.
“The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other,” Moffett noted, adding that it’s “reasonable” to expect a weak Q3 across the pay TV industry.
Likewise, he held that “it is becoming increasingly clear that the wheels are falling off of satellite TV,” anticipating a tough Q3 from Dish Network’s satellite TV business as well.
Lastly, he said this backdrop on the stress being applied to pay TV “makes an AT&T acquisition of Dish Network all but unthinkable.”
Despite those video losses and devastation cause by recent hurricanes as well as earthquakes in Mexico, AT&T also reiterated full-year 2017 guidance of mid-single digital adjusted earnings growth, capex in the $22 billion range, and free cash flow at the low end of its $18 billion range. However, damage to its network and other property and the cost to restore services and waived charges are expected to result in a drop of Q3 consolidated revenues of nearly $90 million, with pre-tax earnings of about $210 million (2 cents per diluted share).
“We expect further reductions in the fourth quarter as we continue to assess damage to our network and fully restore service,” AT&T said.
AT&T also announced that, effective July 1, it is reporting prepaid IoT connections (mostly for car connectivity) as a separate class in its subscriber categories. That change will result in 97,000 additional prepaid net adds in Q3.
The smarter way to stay on top of the multichannel video marketplace. Sign up below.
Thank you for signing up to Multichannel News. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.