AT&T mostly interests us at Faultline Online Reporter for the results of the Entertainment Group, and for the first-time AT&T has broken out OTT video and in particular DirecTV Now, and admits that it has attracted 200,000 subscribers to the service since it was launched at the end of November. At that run rate AT&T is likely to smash estimates of 1 million subs in a single year and get closer to 2 million.
We had assumed that AT&T would try to hide the weakness of its TV subscribers, by including the far less profitable OTT subs among a headline figure. Not so. Unlike Dish and Comcast, AT&T wants to be scrupulously honest with us over its OTT numbers.
Well not quite so scrupulous, as we noted that when the merger was announced DirecTV and AT&T had respectively 20.3 million and 5.97 million subs, and rounding up, a combined total of 26.3 million. AT&T has decided to focus on profitability and suggests that subscriber numbers are more or less the same as a year ago, but that’s 25.3 million, and we have pointed to the 1 million customer losses before, which simply do not add up in AT&T’s figures. OK we accept that while DirecTV was in limbo, subscribers cancelled and they have stopped cancelling, but there continues to be no-upside for the investor until AT&T has 1 million more subscribers.
At the current rate that will be never, since it has remained on 25.3 million for the past 5 quarters. DirecTV satellite gains in the past 3 quarters were all above 300,000. They have now fallen to 235,000 and the U-Verse TV losses have been above 300,000 in the past 3 quarter, and they have fallen to 262,000. Our guess is that AT&T is tightly controlling the subscriber numbers at the right level by manipulating price on a local basis. It is happy with 25 million and wants the lowest churn and least effort, and highest ARPU and yield at that level. DirecTV Now is the one that is meant to grow the business.
On broadband, it is in much the same boat as Verizon, in that it has had a lot of trouble growing that base and has to be applauded for adding 3,000 net broadband subscribers, after multiple periods of declines. Of course, it has promised the FCC that it will add 12.5 homes passed with faster broadband (over 45 Mbps), so as this strategy unravels, AT&T should be beginning to find new broadband customers.
This quarter it had a net gain of 136,000 IP broadband subscribers in the fourth quarter, by which it means mostly U-Verse, and DSL losses of 133,000, for total broadband subscriber growth of 3,000. Today it lists 12.9 million broadband customers as IP broadband, with just 1.29 million DSL lines left among consumers. Once it has converted those to a combination of IP and even newer, high speed technologies such as G.fast and wireless, then AT&T’s broadband numbers should start rising once again, but that will still be a year away, at the current rate.
The main focus on AT&T will have been from analysts looking at cellular where it achieved a creditable 1.5 million net adds in the US, better than most expected, and much of it to do with special offers, we’re sure, to DirecTV customers. DirecTV growth in Latin America has suffered from weak economic conditions, and only rose revenues on price rises, while AT&T has grown its Mexican cellular operations meaningfully.