Verizon Q2 Exceeds Forecasts; AT&T Boosting HBO Original Content Spending
The top two U.S. carriers reported quarterly results, with some mixed news as they concentrate on 5G and other initiatives.
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Verizon said it added 531,000 net postpaid subscribers but lost a net 236,000 prepaid during Q2. Earnings and revenue beat analyst expectations. Verizon benefited from T-Mobile and Sprint taking a more “rational” approach to pricing in the aftermath of their deal announcement, said Wells Fargo’s Jennifer Fritzsche on CNBC. About 82 percent of Verizon customers are now on non-discounted wireless plans, she said. Revenue rose 5.4 percent to $32.2 billion from the year-ago quarter. Net earnings were $4.2 billion vs. $4.5 billion.
AT&T had 46,000 postpaid U.S. wireless net additions and 356,000 prepaid adds. The Entertainment Group gained 80,000 net video subscribers, with "total video customer base stable with DIRECTV NOW; AT&T WatchTV launched," the carrier said. Revenue fell about $800 million to $39.0 billion, and "declines in domestic video and legacy wireline services were offset by adding approximately $1.1 billion from Time Warner net of eliminations and growth in wireless, strategic business services and advertising." Net income attributable to AT&T rose about $1.1 billion to $5.1 billion.
The Tuesday call was the last for longtime Verizon CEO Lowell McAdam (see 1806080050). “We've got a strong balance sheet, we've got a clear strategy, and I think we are going to put a significant distance between us and the competition,” he said on a call with analysts. McAdam emphasized 5G. “We have driven the 5G ecosystem by pushing the industry to adopt the next-generation several years ahead of original expectations,” he said. “We are positioned to be the clear leader in the deployment of 5G services.” On 5G, “we want to play to win,” he said.
Incoming CEO Hans Vestberg said Verizon is changing how it’s investing in its network with many more small cells and less spending on macro towers. Building out 5G will require investments throughout the network, he said: It's “a big undertaking but we are in the midst of it.” Houston will get 5G wireless later this year, Verizon said Tuesday. It’s the third city revealed in Verizon’s four-market 5G deployment plan, following Sacramento and Los Angeles (see 1805150060 and 1804240059), it said. AT&T's chief plans to launch wireless 5G service in parts of 12 markets this year.
AT&T's FirstNet network build is accelerating with 12,000 to 15,000 700 MHz Band 14 sites on air by the end of this year, ahead of its contractual commitment, AT&T CEO John Donovan said during the company's Q2 earnings call later in the day. He said more than 1,500 public safety agencies have signed onto FirstNet so far, nearly doubling adoption since April. Donovan said the transition from DSL is nearly done, with 95 percent of its subscribers on its IP network.
Donovan said AT&T will begin testing a streaming product that mirrors all DirecTV content over broadband, and that the company has launched a $15 a month skinny bundle video service. Chief Financial Officer John Stephens said AT&T is starting to see some stability in video revenue as it gets through some promotional pricing and expects to see a cloud DVR offering and more pay-per-view options likely driving revenue growth. John Stankey, CEO of WarnerMedia, the former Time Warner, said Warner Bros. has more than 75 TV series in production for the upcoming season, its largest number ever. He said AT&T intends to push Warner brands across its distribution platforms.
Warner will increase spending on HBO original content and to build its direct-to-consumer offerings through using more WarnerMedia intellectual property, the unit's chief said. He said it's also looking to increasingly use its content internationally. Stankey said direct-to-consumer requires scale and that while some of its brands generate millions of subscribers, "we want to be generating audiences in the tens of millions" and he is looking at aggregating its brands. The earnings call marked AT&T's first since the Time Warner close, and it came from TW's headquarters in New York City. The company didn't take questions about the FCC Connect America Fund II auction (see 1807240062), citing a quiet period.