What To Watch As AT&T Publishes Q1 Results

by Trefis Team
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AT&T (NYSE:T) is expected to publish its Q1 2018 results on Wednesday, April 25, reporting on a quarter that is likely to see the company’s postpaid phone business continue to see positive momentum, driven by its unlimited plans. Below, we take a look at some of the key trends that we will be watching when the company reports earnings. You can also use our interactive dashboard to see our expectations for the quarter, and see how changes in our forecasts can impact the company’s earnings and valuation.

Postpaid Phone Net Adds Could Continue 

During Q4 2017, AT&T’s postpaid phone business finally turned the corner, posting net additions of 329k, ending multiple years of subscriber attritions. It’s likely that the trend will continue in Q1, driven by the carrier’s device promotions such as the BOGO offer on the iPhone X  and a continued strong uptake of the carrier’s unlimited plans. It’s likely that churn levels will also decline on a year-over-year basis, driven partly by the carrier’s bundled video offerings. However, wireless phone ARPU is likely to trend lower, due to a higher mix of unlimited plans, which will limit the overage fees that the carrier earns.

Pay TV Business Has Been Facing Headwinds

AT&T’s pay TV business has been underperforming in recent quarters, as both its DirecTV satellite product as well as its U-Verse IPTV product have been losing customers, on account of cord cutting and a shrinking pay-TV market (147k and 60k losses, respectively in Q4). While we expect the trend to continue, it’s possible that the net additions at AT&T’s over-the-top service, DirecTV Now, will more than offset the losses at the pay-TV operations. That said, the OTT service, which had about 1.2 million subscribers at the end of 2017 is unlikely to be anywhere near as profitable as traditional offerings due to its lower price points (starting at $35 compared to ARPU of $127 in Q4 for traditional offering) and high content costs.

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