AT&T wireless business grows but premium TV subscribers decline

(Reuters) - AT&T Inc T.N exceeded analyst expectations on Wednesday for net wireless subscribers who pay a monthly bill, as it eked out some growth in a saturated market and continued to bundle media content from Time Warner into new wireless plans.

FILE PHOTO: A woman uses her phone as she passes by an AT&T store on Wall St. in New York, U.S., June 19, 2019. REUTERS/Brendan McDermid

But the second-largest U.S. wireless carrier by subscribers lost more premium TV subscribers than the previous quarter as viewers moved to streaming services like Netflix Inc NFLX.O.

AT&T lost 778,000 premium TV subscribers, a category that includes DirecTV satellite and U-verse television customers, much more than the 544,000 lost in the first quarter. The company also lost 168,000 streaming DirecTV Now accounts. AT&T said it expects a similar level of video losses to continue in the current quarter.

Still, it added a net 72,000 phone subscribers, beating analyst estimates for 27,000, according to research firm FactSet.

Postpaid phone churn, or the rate of customer defections, was 0.86%, up from 0.82% in the previous year.

Shares of the company were up 2.1% at $32.77.

AT&T closed its $85-billion acquisition of media company Time Warner in June last year, creating a new business segment called WarnerMedia to house assets including the Turner TV networks and premium channel HBO.

The new WarnerMedia segment, which includes Turner and premium TV channel HBO, reported revenue of $8.4 billion, against analyst expectations for $8.3 billion, according to IBES data from Refinitiv.

The company said WarnerMedia’s new streaming service HBO Max is slated to launch in spring of 2020.

AT&T has been focused on paying down its debt after the purchase of Time Warner, which pushed its net debt load to about $180 billion last year.

The company spent $6.8 billion on paying off the debt in the second quarter, and said it was on track to cut its net debt load to about $150 billion by the end of the year.

AT&T also raised its free cash flow guidance for 2019 to around $28 billion.

“The debt we have will be at a very reasonable place as we exit this year, (and) I fully expect that we’ll be buying some stocks back as we go on this year and (expect) cash flows to continue,” Chief Executive Randall Stephenson said in a conference call with analysts.

He also said that AT&T strategy will not be impacted by the result of the proposed merger between T-Mobile and Sprint for the next three years. The Department of Justice is expected to make a decision on the merger this week.

Total operating revenue in the second quarter rose 15.3% to $44.96 billion. Analysts were expecting $44.85 billion, according to IBES data from Refinitiv.

Net income attributable to AT&T fell to $3.71 billion, or 51 cents per share, from $5.13 billion, or 81 cents per share, a year earlier.

Excluding items, AT&T earned 89 cents per share, in line with estimates.

Reporting by Akanksha Rana in Bengaluru and Angela Moon in New York; Editing by Nick Zieminski, Bernadette Baum and Susan Thomas