AT&T to focus on video revenue to offset pressure on mobility business

AT&T data plansAT&T CEO Randall Stephenson presented one of the worst financial performances for the US-based telecom operator.

AT&T is continuing to bet on video business with the acquisition of Time Warner to arrest declines in legacy wireline services and consumer mobility. The proposed T-Mobile Sprint combine will be one of the main rivals in the video business. Verizon Wireless is also adding video content to attract more entertainment customers to its network.

The three percent drop in revenue of AT&T to $39.7 billion was a reflection of pressure across all of the company’s core businesses, with the exception of its international division. Natural disasters also had a negative impact on earnings, contributing to higher operating costs and subscriber declines in the quarter.

# Consolidated revenues of $39.7 billion

# Operating income of $6.4 billion

# Net income of $3 billion

# EBITDA margins of 42 percent

# Wireless service margin of 50.4 percent

# Operating expenses of $33.3 billion

# Capital expenditures of $5.3 billion in the quarter

# Capital expenditures of $16.5 billion in 9 months

Randall Stephenson, AT&T chairman and CEO, said: “We’re on track to have one of the largest high-speed internet networks in the U.S., reaching more than 50 million customer locations with competitive high speeds. This expansion will make our bundled video, mobile and broadband services even more compelling.”

AT&T lost 97,000 postpaid phone customers in Q3 2017 against a loss of 268,000 subscribers in Q3 2016. AT&T’s postpaid phone churn was 0.84 percent — showing the success of video and wireless bundling strategy.

AT&T achieved wireless EBITDA margin of 42 percent. Operating margin of AT&T increased 40 basis points to 16.1 percent as AT&T generated cost savings from its NFV/SDN initiatives. AT&T expects it will have 55 percent of its network virtualized and software-controlled by the end of 2017.

High-speed Internet revenue rose 1.3 percent. AT&T’s legacy data revenue fell mainly due to DSL disconnections. AT&T will be expanding its fiber-to-the-premises (FTTP) footprint to 12.5 million locations by mid-2019.

“AT&T is also leveraging other technologies such as G. fast and fixed-wireless services where it is more cost efficient than fiber, particularly in rural and underserved markets and multi-dwelling units,” analyst firm TBR said.

AT&T lost 385,000 traditional TV customers due to the availability of more flexible OTT services such as Netflix, Hulu and HBO Now which offer desired content at a significant cost savings compared to linear TV packages.

AT&T gained 296,000 DirecTV Now customers in the third quarter. TBR forecast that the decline in ARPU from the subscriber trade-offs will likely cause video entertainment revenue to gradually decelerate in 2018.

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