Low-Band Spectrum Helping AT&T Grow Customer Base, CEO Says
AT&T reported mostly positive Q3 results Thursday, adding wireless subscribers as revenue beat Wall Street estimates. Among negatives, the COVID-19 pandemic continues to take a toll and the entertainment unit is struggling. AT&T shares closed 5.9% higher Thursday at $28.29. The stock had declined 30% this year, despite a 7% dividend.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
As COVID-19 hit and “wireless networks became much more suburban-oriented than urban-oriented,” AT&T’s low-band holdings helped it add customers, CEO John Stankey told investors. “When you think about penetrating inside buildings, you need low-band spectrum to do that,” he said: “Mid-band is not going to do that in a suburban environment nor is millimeter wave, at least not anytime soon.”
AT&T is seeing signs of recovery, with production back underway at its Warner subsidiary, Stankey said. “The confidence level of employees is growing day by day that we can in fact protect the safety of individuals and still get work done,” he said. “We're out of the woods at this point from being dead cold in the middle of the pandemic," he said. AT&T reported 645,000 net postpaid phone net adds, including 151,000 under the Keep Americans Connected pledge, with postpaid churn of .69%, down from .77% last year. Revenue was $34.3 billion, 3.1% lower year over year and $7.6 billion, down 4.8% year over year.
On the entertainment side, AT&T reported losing 590,000 pay-TV subscribers, mostly at DirecTV, and 37,000 internet video subscribers. HBO and HBO Max subscribers hit 38 million, up from 36.3 million in Q2. AT&T said revenue was down due to the COVID-19 pandemic and that trend will continue in Q4, with lower revenue from the partial closure of movie theaters and postponement of theatrical releases, a decline in revenue from international roaming due to reduced travel, and increased expenses “to protect front-line employees, contractors and customers.” Chief Financial Officer John Stephens said some company stores won’t reopen. “We shifted some stores to third-party dealers, closed others” and streamlined “our customer experience,” he said.
MoffettNathanson’s Craig Moffett told investors the big question is why AT&T was making the new iPhone available essentially for free. “Why would the company with the weakest balance sheet in the industry, with a dividend obligation that is teetering on the edge of unsustainability, take such a costly and rash promotional stance?” he asked: “The only possible answer is that AT&T saw a wave of churn coming that they believed would be even more costly than the promotion they launched to stop it.”
Stankey defended A&T’s iPhone offer. When subscribers leave it's not because of customer service or that they don't like the network, “it's because more often than not, they see some enticement to go somewhere else and that's usually a device offer or a belief that they can't fine-tune their plan to meet their economic construct that they want,” he said. “We're now in a position where we can address that.”