AT&T Inc. laid out its plans to dominate the market across wireless, entertainment, and integrated communications segments, as it missed the mark on second-quarter expectations.
John Stephens, AT&T’s chief financial officer, provided a mid-year update to investors after releasing second-quarter results. During its second quarter, AT&T, which is now the largest pay-TV company, lost 49,000 TV subscribers as it scrambles to jump into the streaming services frenzy. It also shed 180,000 postpaid subscribers, according to Bloomberg.
AT&T reported $3.4 billion, or 72 cents per share, excluding merger- and integration-related expenses, in profit on $40.5 billion in revenue. The results missed analysts’ predictions that the company would generate $40.6 billion and 72 cents per share in profit. But they did show a jump from the second quarter of last year, when the company reported $3.1 billion in profit on $33 billion in revenue.
It also reported a .97 percent postpaid churn, which marks AT&T’s second best quarter ever.
AT&T has spent its latest efforts laying the groundwork that will continue its expansion across Mexico, roll out integrated video and phone services with help from its acquisition of DirecTV, increase its capacity with additional spectrum, and introduce a streaming service that will be a “game changer,” Stephens said.
Here’s a look at what Stephens told investors Thursday:
Streaming entertainment
Stephens alluded to several items coming in the near future. Right off the bat, he discussed a streaming service the company is about to launch that will grow its customer base. Those who want a streaming option “will be impressed,” he said. This comes two months after the company acquired Quickplay Media, a Toronto-based company that specializes in the over-the-top service. Terms of that deal were not disclosed and, during the second-quarter earnings call, Stephens did not give many details about whether Quickplay was a part of the new rollout. But AT&T has had its eye on the TV Everywhere game for a while now. It’s one of the reasons the giant acquired DirecTV.
5G preparations
The company is well positioned for increased data consumption and 5G, as it sheds spectrum from its 2G and 3G networks. The company expects to shut down its 2G network by the end of the year. The company has about 150 MgHz of spectrum in its portfolio, with about 40 mGHz unused. It also applied to participate in the upcoming spectrum option. When it comes to speed, AT&T has more fiber covering more buildings than any of its competitors, Stephens said. Its GigaPower service is expected to reach at least 12.5 million customer locations over the next few years. By the end of the year 2.6 million homes should have access, he added.
Entertainment segment
AT&T reported that its revenue grew from satellite subscriptions. The company gained 342,000 satellite subscribers, but lost 391,000 U-verse, totaling a net loss of 49,000. But that didn’t stop Stephens from touting the rise in revenue. After all, the company overcame the pressure of going up against last year’s record-breaking numbers for the Mayweather-Pacquiao fight. Advertising generated a $1.4 billion annualized revenue stream for the company. More than 80 percent of AT&T’s domestic video is now on DirecTV.
Financial position
AT&T is on track to receive $1.5 billion in synergies from the DirecTV acquisition by the end of the year, Stephens said. He expects the company to reach the previously announced $2.5 billion in savings by the end of 2018. Meanwhile, Project Agile, which helps the company serve customers digitally, is on track to generate $3 billion in savings. Stephens said the company is past the midway point of making that happen. The company is also looking at legacy services and properties that it can cut. The cuts will cost the company some revenue, but increase profitability overall.
Mexico update
The company reported 742,000 wireless net adds and a 13 percent rise in revenue for the quarter. It has 10 million Mexican wireless subscribers across 61 cities. Its LTE network covers 65 million people. That number is expected to grow to 75 million by the end of the year. The company added 87 million video subscribers, driven by the popularity of Copa America, which was negatively impacted by the earthquake in Ecuador.
