AT&T Inc. (NYSE:TC) reported Q1 numbers Tuesday reflecting no effective change in the DirecTV customer base and a loss of 233,000 subscriptions on the U-verse side of the ledger. According to AT&T CFO John Stephens, competition from rivals and OTT services were partly to blame for lackluster numbers.
Stephens said the company planned to address areas where the company doesn’t offer broadband, which he said hurt DirecTV sales. In addition, the company said it would take steps to be more aggressive in marketing DirecTV in the second half of 2017. None of this had much to do with the traditional wireless part of the business.
Wireless Losses But 5G Gains
That could be because the company reported a drop of 289,000 wireless customers in Q1, the first ever drop in that segment. As has been widely reported, T-Mobile US Inc. (NYSE:TMUSA) gained 914,000 subscribers in the period, beating Wall Street expectations and putting pressure on AT&T and Verizon Communications Inc. (NYSE:VZC) to add unlimited data plans.
Meanwhile, AT&T announced Tuesday it planned to roll out pre-standard 5G wireless networks in 20 major metro areas by the end of the year. The 5G networks offer twice the speeds of 4G LTE and provide AT&T with a potential replacement for cable broadband.
Overall, while quarterly earnings met analysts’ expectations, revenue was a disappointment. Earnings per share were 74 cents, as expected. Revenue, however, came in at $39.37 billion. Wall Street had expected $40.53 billion.
These numbers compare to the same quarter a year ago when EPS was 72 cents on revenue of $40.5 billion. According to AT&T record-low equipment sales in wireless and slow reaction to the push for unlimited data plans also contributed to lower than expected revenue.
In the earnings conference call CEO Randall Stephenson also discussed the pending Time Warner Inc. (NYSE:TWXC) acquisition. Stephenson said he expected the deal to be approved. "As we bring Time Warner in the family,” he noted, “we are convinced we can really enhance Time Warner's revenue streams by virtue of customer data and viewership data on the distribution side of the house."
At the same time, AT&T’s plans to acquire Straight Path Communications for $1.6 billion hit a snag when Straight Path announced Tuesday that it had received an offer from a "multinational telecommunications company" that topped AT&T's. AT&T said it knew about the offer and would evaluate how to respond within 5 days.
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Wireless? What Wireless?
The embarrassing loss of thousands of wireless customers and slow trigger reaction to unlimited data have helped spark AT&T’s push to get into everything from content to satellite to OTT service. In other words, anything but wireless.
When it comes to competing with Alphabet Inc.’s (NASDAQ:GOOGC) Google and Facebook Inc. (NASDAQ:FBC) in the realm of advertising, AT&T hopes a new administration in Washington will help. As Stephenson said on the conference call, "There was a lot of consternation with the former FCC over things like sponsored data and set-top boxes. Now all those concerns are gone."