AT&T Books $15.5 Billion Charge on DirecTV Unit--Update
28 January 2021 - 12:22AM
Dow Jones News
By Drew FitzGerald
AT&T Inc. booked a $15.5 billion charge on its pay-TV
business, reflecting the damage cord-cutting has taken on its
DirecTV satellite unit even as the company's HBO Max streaming
service's growth ramped up.
The write-down created a fourth-quarter loss as the media and
telecom giant signaled it would move away from traditional channel
bundles to focus on streaming media. The company reported quarterly
revenue declines in its pay-TV and WarnerMedia units, offsetting
gains in its core wireless phone division.
Overall, AT&T reported a fourth-quarter loss of $13.89
billion, or $1.95 a share, compared with a profit of $2.39 billion,
or 33 cents a share, a year earlier. Revenue fell 2.4% to $45.7
billion.
The coronavirus pandemic has strained the giant, hurting
advertising at cable networks like CNN and TBS and closing many of
the theaters that show its Warner Bros. films. Those pullbacks
obscured gains in the company's wireless service, which still
generates more than half of the company's profits.
The last three months of the year gave AT&T a net gain of
800,000 postpaid phone subscribers, a metric closely watched by
Wall Street. Rivals Verizon Communications Inc. and T-Mobile US
Inc. reported net gains of 279,000 and 824,000 such connections,
respectively.
Revenue from AT&T's WarnerMedia division fell 9.5% to $8.5
billion as the show business side continued to wrestle with low
box-office revenue and weak advertising revenue. The HBO business
grew and ended the year with 41.5 million U.S. subscribers, a
figure that includes older cable plans as well as the new online
service.
AT&T's media division stunned Hollywood last year with a
plan to release all of Warner Bros.' 2021 movies on HBO Max the
same day they hit theaters. Executives said the move would help the
business cope with audiences reluctant to visit theaters during a
pandemic while giving the studio's sister streaming service an
extra boost.
HBO Max ended the year with 17.1 million activated accounts. It
is competing in a crowded streaming-video marketplace where Netflix
Inc. has already eclipsed more than 200 million subscribers
world-wide.
Revenue in the video unit, which includes AT&T's U-verse and
DirecTV services, fell 11% to $7.2 billion in the fourth quarter.
The business ended the year with 17.2 million domestic connections,
down from 20.4 million at the end of 2019.
AT&T has held deal discussions with suitors, including
private-equity firm TPG, that valued the video business at more
than $15 billion including debt, the Journal has reported. The
fourth-quarter write-down reflects how the business has changed
since AT&T bought DirecTV in 2015 for $49 billion.
The Wall Street Journal reported in August that AT&T had
tapped bankers to explore a deal to take the fast-shrinking
business off its books. The transaction could allow AT&T to
deconsolidate DirecTV's worsening financial results while retaining
a stake in the TV giant.
The video losses have weighed on AT&T's stock, which missed
out the stock market's rally. AT&T shares fell about 20% last
year.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
January 27, 2021 08:07 ET (13:07 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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