AT&T lost another 897,000 premium TV subscribers in Q1 2020, as the DirecTV owner’s string of massive customer losses continued. An AT&T executive today said the company is moving ahead with a company-wide cost-cutting program.
AT&T’s earnings announcement today said the 897,000-customer net loss reduced the total number of premium TV subscribers to 18.6 million. AT&T said the latest customer loss was “due to competition and customers rolling off promotional discounts as well as lower gross adds from the continued focus on adding higher-value customers.”
AT&T’s premium TV category includes DirecTV, U-verse TV, and the new AT&T TV online offering that mimics cable and satellite services by imposing contracts, hidden fees, and a big second-year price hike. In 2019, AT&T lost 3.43 million premium TV customers, an average of nearly 860,000 per quarter.
AT&T hasn’t done much to stop subscriber losses, as the company seems focused on raising the average revenue per customer instead of offering deals that would entice people to stick around.
The company today also reported a 138,000-subscriber net loss in AT&T TV Now, a streaming service that’s separate from the premium TV category. AT&T TV Now is down to 788,000 subscribers, only a year after AT&T reported more than 1.5 million subscribers to the service. Formerly known as DirecTV Now, the streaming service hit a peak of 1.86 million subscribers on September 30, 2018, before customers started canceling as their discounts expired. AT&T attributed the latest customer loss to “higher prices and less promotional activity.”
Video-service revenue in the quarter was $7.4 billion, “down 8.4 percent year over year due to declines” in TV subscribers, “partially offset by higher” average revenue per user, AT&T said. Video is part of the AT&T Entertainment Group, which also includes broadband and landline phone services. The Entertainment Group reported operating revenue of $10.5 billion in Q1, down 7.2 percent year over year due to declines in video “and legacy services,” AT&T said. Operating income in the group was $1.3 billion, down 9.7 percent year over year.
Going forward, AT&T has expressed high hopes for HBO Max, a $15-per-month service that’s due to launch on May 27. AT&T has set a goal of 50 million HBO Max subscribers in the United States within five years, but plans to include HBO Max with certain mobile, TV, and Internet plans mean that many customers will get it for no extra charge.
Cost-cutting in progress
As we reported in early March, AT&T is planning tens of billions of dollars’ worth of cost cuts, including job cuts, over the next three years. Today, AT&T COO John Stankey told investors that “we’re not backing off our cost and efficiency transformation initiatives that remain largely under our control,” according to Light Reading.
The first of those cost-cutting efforts “focus on AT&T’s retail and third-party distribution operation” and the company’s field operations, the Light Reading article said. Those two cost-cutting efforts are “now underway” and “would cut a combined $1 billion in recurring costs from the operator’s bottom line,” Light Reading reported. Stankey said AT&T will try to get more efficient at solving customer problems so the company can reduce the number of technician visits to customer homes.
DSL-customer losses outstrip fiber gains
As for home Internet service, AT&T added 209,000 fiber customers in Q1 but lost 73,000 customers overall as the decline of DSL continued. AT&T said the 73,000-customer net loss was caused by “competition in slower speed territories and loss of bundled video subscribers, partially offset by recent higher demand and lower churn due to the COVID-19 crisis.” AT&T has 4.1 million fiber-Internet customers and 14.05 million Internet customers overall, down from 14.45 million a year ago.
AT&T mobile revenue was $17.4 billion, up 0.2 percent year over year. Operating income in AT&T’s mobile division was $5.8 billion, up 9 percent.
Company-wide, revenue was $34.2 billion, down 2.6 percent year over year “due to declines in Entertainment Group, wireless equipment and Business Wireline that were partially offset by gains in wireless service revenues,” AT&T said. Total operating income in the quarter was $8.2 billion, up 2.4 percent.
AT&T said its results “underscored the financial strength and ample liquidity of the business even with current economic conditions” caused by the pandemic. Still, CNBC reported that “AT&T’s first-quarter revenue fell short of Wall Street expectations and the company pulled its annual forecast on Wednesday, as the impact of the coronavirus outbreak overshadowed a strong growth in monthly phone subscribers.”
Advertising revenue “was severely hit due to the postponement of live sports such as March Madness, and lower wireless equipment sales led to a $600 million decline in revenue,” CNBC noted. AT&T’s WarnerMedia division “suffered the brunt of the impact from the pandemic, report[ing] $7.4 billion in revenue, down from $8.4 billion from a year earlier.”