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It’s been a year since AT&T closed its deal for DirecTV, and the telco’s top brass are pleased together with the progress in assimilating the satellite operator into its fold. But over the same period of time, the telco has seen its own U-verse TV service shrivel.
DirecTV’s U.S. video business added a tremendous 342,000 net subscribers for your period ended June 30. Although the company’s total video base shrank, for that third straight quarter, because of a net loss of 391,000 U-verse TV subs. The overall decrease of 49,000 video subscribers stemmed from a “focus on profitability and increasingly emphasized satellite sales,” at the same time since the fact that the second quarter of the year is seasonally weak, according on the company.
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AT&T remains the biggest pay-TV operator from the U.S., having vaulted ahead of Comcast with all the DirecTV deal. The business asserts it isn’t abandoning U-verse video, but clearly it’s favoring the satellite side, which AT&T notes delivers higher margins. As of the end in the second quarter, 81% of its 25.3 million total TV subscribers are on DirecTV.
“One year after our acquisition of DirecTV, the success of your integration has exceeded our expectations,” said Randall Stephenson, AT&T chairman and CEO, in announcing the results. DirecTV added a net 910,000 customers over the last 12 months, to reach 20.454 million U.S. subs as of June 30, 2017.
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According to the telco, the cost synergies from the DirecTV deal, which closed on October 24, 2015, are ahead of target. Last quarter, the company said it was on track to reach cost synergies of $1.5 billion or better by the end of 2017, and to exceed a $2.5 billion run rate with the end of 2018.
Execs touted the new DirecTV-branded video streaming services that are scheduled to roll out later this year, but didn’t provide any new details. On a call with analysts Thursday, CFO John Stephens boasted that the DirecTV Now over-the-top subscription service will be considered a “gamechanger.”
“DirecTV Now is scheduled to launch later this year, and we expect the millions of people who don’t now subscribe to a video service and prefer a streaming option will be impressed,” Stephens said. He declined to provide a launch timeline, emphasizing that the focus is to deliver a “high quality” product.
As previously outlined, the three over-the-top services are: DirecTV Now, with a range of channel packages accessible over wired or wireless Internet connections and on Internet-enabled devices; DirecTV Mobile, a “mobile-first” service for premium and made-for-digital video; and DirecTV Preview, a free of charge, ad-supported service with a sampling of content including originals from the AT&T Audience Network and series from Fullscreen, owned by the Otter Media joint venture of AT&T and the Chernin Group.
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“We plan to serve every segment of your video industry and offer customers their favorite content virtually wherever and whenever they want it,” Stephenson said.
AT&T’s broadband business dropped by 110,000 subscribers in Q2, as a net gain of 54,000 fiber-based broadband subs failed to offset the loss of 164,000 subscribers in its slowly dying DSL business. The company’s Entertainment Group, which comprises TV, Internet and phone services, posted operating income margin of 13%, up from -3.4% in the year-earlier quarter; AT&T said satellite and IP revenue growth and cost efficiencies offset rising TV content costs and declines in legacy services.
Overall, AT&T revenue for your second quarter was $40.52 billion, up 22.7% versus the year-earlier period but slightly below analyst estimates of $40.62 billion. The increase was largely attributable for the DirecTV acquisition. Net income was $3.4 billion, compared with $3.1 billion a year ago. The organization reported adjusted earnings per share of 72 cents – in line with Wall Street expectations – versus 70 cents inside the second quarter of 2015.
On the wireless front, AT&T Mobility revenue was $17.9 billion, down 2.1% year over year, mostly due to decreases in equipment revenue due to lower sales volumes and higher bring your own device (BYOD) subscribers from the quarter. Total wireless subscribers (business and consumer) increased by 1.36 million to reach 131.8 million, and increase of about 7.9 million over the past year
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