AT&T eats a $15.5 billion impairment cost as DirecTV debacle continues

A man with an umbrella walking past a building with an AT&T logo.
Enlarge / A person walks with an umbrella exterior of AT&T company headquarters on March 13, 2020, in Dallas, Texas.

AT&T misplaced 617,000 clients from DirecTV and its different TV companies within the closing quarter of 2020, capping a yr through which it misplaced almost 3 million clients within the class, AT&T reported today.

AT&T at present additionally informed the Securities and Exchange Commission that it has taken “noncash impairment prices of $15.5 billion” associated to its ongoing DirecTV debacle. AT&T mentioned the $15.5 billion prices replicate “modifications in our administration technique and our analysis of the home video enterprise… together with our resolution to function our video enterprise individually from our broadband and legacy telephony operations.” This operational resolution “required us to establish a separate Video reporting unit and to evaluate each the recoverability of its long-lived belongings and any assigned goodwill for impairment,” AT&T mentioned.

AT&T mentioned it additionally logged “prices of roughly $780 million from the impairment of manufacturing and different content material stock at WarnerMedia, with $520 million ensuing from the continued shutdown of theaters through the pandemic and the hybrid distribution mannequin for our 2021 movie slate.”

The fees had been added to AT&T’s This fall bills. Because of this, AT&T reported a $13.9 billion web loss within the quarter, in comparison with a web revenue of $2.4 billion a yr in the past. This fall income was $45.7 billion, down from $46.8 billion yr over yr. The This fall web loss swung AT&T to a full-year web lack of $5.4 billion.

“Executives referred to as the non-cash accounting cost an indication of the pay-TV unit’s ageing standing because the Dallas firm promotes an Web-streaming mannequin that offers its content-production enterprise a direct line to viewers,” The Wall Avenue Journal wrote today.

“Our largest and single most essential guess is HBO Max,” AT&T CEO John Stankey mentioned.

Premium TV clients flee in droves

AT&T is down to 16.5 million customers within the Premium TV class that features DirecTV satellite tv for pc, U-verse wireline video, and the newer AT&T TV on-line service. That is down from 17.1 million three months earlier and down from 19.5 million for the reason that starting of 2020.

AT&T has strung collectively a number of years of huge TV-customer losses since early 2017, when it had over 25 million customers within the class. The lack of almost 3 million clients in 2020 was an enchancment over 2019, when AT&T misplaced 3.4 million Premium TV clients within the calendar yr.

These numbers don’t embody the streaming service previously generally known as DirecTV Now, which AT&T just killed off this month. The service dropped from 1.86 million subscribers in Q3 2018 to 656,000 by year-end 2020. Present clients can maintain that service, however AT&T is not providing it to new customers.

DirecTV and U-verse clients have been pushed away by years of worth will increase and AT&T’s diminished use of promotional provides. That is mirrored in AT&T’s common income per person (ARPU) within the Premium TV class, which jumped from $121.76 monthly at year-end 2018 to $131 at year-end 2019 and $137.64 on the finish of 2020.

AT&T attributed the 617,000-customer loss in This fall to “competitors, decrease gross provides from the continued deal with including increased worth clients and a programming dispute, partially offset by decrease churn.”

Video income down 11.2 %

AT&T reported video income of $7.2 billion in This fall 2020, “down 11.2 % yr over yr because of declines in premium and [online] subscribers, partially offset by increased premium TV ARPU and better promoting revenues through the common election.” Working bills within the class had been $7.1 billion, leaving AT&T with a revenue of $98 million.

AT&T does not report particular person numbers for DirecTV, U-verse TV, and AT&T TV. However the firm mentioned good points in AT&T TV streaming subscribers final quarter helped offset losses in DirecTV and U-verse, that means that DirecTV and U-verse collectively misplaced greater than the 617,000 net-customer loss within the Premium TV class.

AT&T mentioned it’s inspired by the progress of HBO Max, which prices $15 a month by itself however can also be included in numerous bundles. “The discharge of Marvel Lady 1984 helped drive our home HBO Max and HBO subscribers to greater than 41 million, a full two years quicker than our preliminary forecast,” Stankey mentioned.

Promoting DirecTV at a loss

AT&T purchased DirecTV for $49 billion in 2015 however has been attempting to promote the beleaguered satellite tv for pc division for the previous few months. AT&T is reportedly close to a deal to promote a stake in DirecTV to TPG, a private-equity agency, however AT&T might preserve majority possession of the corporate. Bids for DirecTV have reportedly valued the subsidiary at about $15 billion.

Fiber good points, DSL losses

AT&T’s broadband-subscriber base remained regular at 14.1 million within the quarter. The corporate boosted fiber-to-the-premises subscribers from 4.68 million to 4.95 million in This fall 2020, but it surely dropped from 8.98 million to eight.74 million in fiber-to-the-node and from 440,000 to 407,000 in its outdated DSL service. AT&T stopped accepting new DSL customers in October 2020.

AT&T mentioned its This fall broadband income was “$3.1 billion, down 1.4 % yr over yr because of declines in legacy companies partially offset by increased IP broadband ARPU ensuing from a rise in high-speed fiber clients and pricing actions.” Working bills had been $2.8 billion.

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