AT&T has produced another set of optimistic numbers which shows that it still has not caught up the video and broadband losses incurred as it chased DirecTV. But AT&T is able to hide this under one of its largest net gains of mobile customers in some time at 2.1 million in the quarter.
Its release and presentation boasted that it is having great success growing DirecTV customers, but it is sacrificing more than one U-Verse customer for each DirecTV video customer it gains, citing 341,000 DirecTV net adds, against 391,000 losses of U-verse video customers, in total losing 49,000 video customers.
AT&T feels that it is free to announce these types of falling figures because it is in good company with other pay players announcing similar figures, as long as it total revenue improves. However, before the deal was announced in May 2014, AT&T and DirecTV revenues combined were $40.3 billion, and they have just passed this point once again, reaching $40.5 billion in the quarter.
Net income prior to the deal being announced was a combined $4.26 billion and today it is only $3.4 billion. So its profitability still has some catching up to do. AT&T can point to many calls on its cash, something we have pointed out time and time again – buying spectrum, building out 12.5 million locations for fast broadband, and filling out an LTE network, not to mention investments in its Mexican operations – so it’s not too surprising that it has a lower net income than the quarter prior to the deal being announced.
Video customers now are 25.3 million, down from 26 million on the day the deal was announced, close to 700,000 off their height. AT&T tried to hide this behind the claim that globally video customers were up by 38,000 – but that flies in the face of less mature Latin American operations, which grew 87,000 video customers – with Sky Mexico now having 7.8 million video customers and the rest of Latin America with 12.5 million – so as a percentage of existing customers this has to be seen as less than 0.5% growth.
In broadband AT&T has made it hard to see clearly and these days’ talks about IP Broadband (as opposed to DSL broadband, which is also IP, but not U-Verse). This is just 12.6 million lines to consumers, and it confirms that although there were 74,000 IP broadband adds, total broadband customers fell 110,000. Two years ago that broadband figure was at an all-time high, including all of its business broadband customers at 16.5 million. We estimate that with business broadband it is still at 16 million, but this means a fall in both video customers and broadband customers, and only a rise in cellular.
Senior management talks confidently about its future, but the naked facts show an operator in trouble and looking for answers. The company is relying heavily on its to be announced OTT video strategy, which now seems to be delayed in coming to market.
By comparison Verizon Wireless added far less 585,000 retail cellular connections, which puts it in third place after T-Mobile USA, which had 1.3 million. Video customers fell by 41,000 and fixed line broadband by 13,000 in the quarter and 46,000 in the year. Total revenues fell 4% to $21.7 billion in the second-quarter. Video subs have only fallen 72,000 in the entire year, so that 41,000 fall is its biggest video loss quarter. Broadband lines have fallen in total to 7 million, and for the year its few remaining DSL customers fell 301,000, countered by a 255,000 rise in FiOS broadband to reach the 46,000 figure above.
What this looks like is that after 9 years of chasing cable for video customers, both AT&T and Verizon are now convinced that video on the phone is the only game in town, and neither cares a jot for new video customers, and so they are both spending a lot less on them. What they want are Mobile TV First customers – individuals who have a TV subscription on their phone.
But given the lackluster performance on the handset front by Verizon, Go90 is not the answer, and while AT&T has yet to show its hand, it may be that the obvious answer is the Binge-On service by T-Mobile.
At its quarterly results, it announced further services on Binge-on including Apple Music, ABC, DISH Anywhere, Disney and Fox and it is rumored to be close to a deal with Facebook video. In each case it sets a maximum data rate for delivery over its cellular network, but also intervenes to push the device to WiFi, if there is an existing service in reach which it has credentials for.
Already it now has 100 OTT video services which when streamed to a T-Mobile phone, do not result in data charges or contributions to the customer’s data cap. It says that customers have streamed 765 million hours of video data-free, so far.
Meanwhile the other pay TV provider to report this week is Dish, which is also showing this downward curve in subscribers, with financial analyst MoffettNathanson, estimating that its loss of 281,000 customers in the second quarter, means that it has now lost 7.5% of subscriber base in just one year, which would amount to over 1 million subs. We have been more generous and suggested it was closer to 900,000, but it’s a big number. The financial analyst puts this squarely at the door of the frequent Dish programming disputes. All numbers are deliberately mixed in with sling TV OTT video numbers, so are hard to establish accurately.
The week ahead will provide the rest of the US numbers for comparison, and almost certainly they will all be down in video subscribers.