AT&T Reports Mixed Results for Q2; Carriage Negotiations Stall
AT&T got more wireless subscribers but lost pay-TV and DirecTVNow internet TV service customers in Q2, it reported Wednesday. Other results were also mixed. CEO Randall Stephenson said the carrier is trying to work out carriage agreements with CBS and Nexstar. The company was the first of the four major wireless carriers to report. Stock closed at $33.24, up 3.58 percent.
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AT&T made a “reasonable” and “fair” offer to CBS and has heard nothing, Stephenson said on a call with analysts (see 1907190056). “When you're as close as we are, we find it a little interesting that we're still sitting here dark and not having interaction with CBS,” he said: “I'm guessing they're probably distracted with other negotiations right now, but I don't know.” Nexstar, is “a very different situation,” Stephenson said. The company asked for about a 100 percent increase in payments, he said. Negotiations began with a “non-starter,” but Nexstar demands were later reduced to about a 50 percent increase, he said. “That one may take longer, but we'll just have to be resolute,” Stephenson said: “We're not going to impose those kinds of price increases on our customers.”
“Nexstar wants nothing more than to bring its programming back to viewers by completing a new fair market agreement with AT&T and continues to negotiate in good faith to establish a mutually agreeable contract with DIRECTV,” a spokesperson emailed: “Nexstar does not intend to negotiate publicly with any of its commercial partners.” CBS didn't comment.
“The headline for Q2 is … we’re hitting each of our commitments we made for 2019,” Stephenson said. Net debt is down $18 billion since AT&T closed its buy of media and entertainment company Time Warner last year and plans are to reduce debt by another $12 billion over the rest of the year, he said. Wireless generates about half of earnings and “continues to fire on all cylinders,” he said.
The FirstNet build is “accelerating” 5G deployment, Stephenson said. “As we deploy FirstNet, we’re installing hardware that can be upgraded to 5G” with a simple software fix, he said: “As a result, we’re on track for nationwide 5G coverage by the first half of 2020.” AT&T said the FirstNet build is 60 percent complete and nine months ahead of schedule, with plans to reach 70 percent completion by year-end.
Net income was $7.5 billion versus $6.5 billion in the year-ago quarter, and revenue rose 15.3 percent to $45 billion, the company reported. Both were higher primarily due to the Time Warner buy. AT&T added 72,000 postpaid wireless customers, but lost 778,000 pay-TV customers and 168,000 subscribers to the DirecTVNow internet TV service.
“The driver of the improved network performance and improved subscriber trends has to be AT&T’s deployment of 60 MHz of new spectrum,” New Street’s Jonathan Chaplin said: “This gives them a strong capacity advantage over Verizon and T-Mobile. The capacity advantage versus Verizon will persist until Verizon gets their hands on the C-band in three or four years, and it will persist relative to T-Mobile until they can start deploying Sprint’s spectrum in earnest, hopefully sometime next year (assuming we get a deal and they beat the states).” Chaplin expects Verizon to also report strong adds next week.
“AT&T is transitioning into a more profitable company despite subscriber growth being limited by market saturation, competitive challenges and shifting consumer trends,” said TBR’s Steve Vachon.
Communications Workers of America slammed the carrier for cutting jobs across the country, despite strong profits and cash flow: “AT&T has eliminated 27,828 jobs since the passage of the Tax Cuts and Jobs Act, cutting 4,500 jobs in Q2 of this year alone,” CWA said. The company didn’t comment.