AT&T Q3: New Plan To Mollify Activist Investor, Pay-TV Subs Drop By 1.4M

In its first earnings report since last month’s critical onslaught by Elliott Management, AT&T this morning announced stepped-up initiatives that represent a compromise fashioned through talks with the activist investor. 

AT&T announced new financial revenue and profit targets for each of the next three years, during which it will pay off the remaining debt from its $80-billion acquisition of Time Warner in 2018. 

The company also committed to reviewing its portfolio for businesses that might make sense to sell or spin off,  implementing regular stock buybacks, and making no “major” acquisitions. 

Further, it announced a plan to add two more directors to its 13-member board, and to separate its CEO and chairman roles once the current holder of those titles, Randall Stephenson, retires. Stephenson, whose strategy for WarnerMedia came under heavy fire from Elliott, will stay on through at least 2020.    

AT&T reported that it lost a total of 1.36 million pay-TV subscribers in the quarter, including 1.2 million DirecTV and U-verse subscribers, and 195,000 AT&T TV Now subscribers. 

That works out to a loss of nearly 20,000 paid subscribers per day. 

The company blamed the DirecTV and U-verse losses on “customers rolling off promotional discounts, programmer disputes and competition, as well as lower gross adds due to the continued focus on adding higher-value customers.” 

DirecTV – which Elliott has asserted should be sold off — had 22.9 million subscribers as of Q2, down from 25.4 million in the same quarter in 2018. 

In early 2019, AT&T projected an upturn in TV Now subscribers in the second half, only to reverse that later in the year, saying losses would continue through year end. It blamed the Q3 TV Now losses on higher prices and less promotional activity. 

However, AT&T’s core wireless business gained customers, including 101,000 postpaid phone subscribers (those who pay monthly bills), versus 61,000 expected by analysts. 

As for Q3 financials, revenue declined 2.5%, to $44.6 billion, versus analysts’ expectation of $45.1 billion. 

Adjusted EBITDA was $15.1 billion, down 0.9% and slightly missing analysts’ expectation of $15.3 billion. 

Profit totaled $3.7 billion, or 50 cents per share, versus $4.72 billion, or 65 cents per share, in the year-ago quarter. However, adjusted EPS was 94 cents, exceeding analysts’ expectation of 93 cents. 

The stock price dropped 6% immediately following the earnings release.

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