Key Takeaways From AT&T’s Q1 2018 Results
AT&T (NYSE:T), the second largest U.S. wireless carrier and largest pay-TV provider, published a mixed set of Q1 2018 results amid continued headwinds at the company’s traditional pay-TV operations and subscriber losses at its lucrative postpaid wireless phone business. Below, we provide some of the key takeaways from the carriers earnings release.
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AT&T’s Postpaid Phone Business Loses Subscribers
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AT&T lost about 22k postpaid wireless phone customers over Q1. While this was well below the 348k losses in the year-ago period, it marks a reversal from the 329k net subscriber additions the company posted over the 2017 holiday quarter. The company added a total of 192k prepaid phone subscribers over the quarter, driven primarily by the Cricket prepaid brand. The carrier’s postpaid phone-only ARPU continued to trend lower, due to the continued shift to unsubsidized plans and an increasing shift towards the unlimited offerings, which limits overage fees. While reported ARPU decreased by 8.6% versus the year-earlier quarter to $53, due to a change in accounting method, the decline stood at about 1.9% on a comparable basis.
AT&T’s Pay-TV Business Continues To Underperform
AT&T’s traditional pay-TV business continued to face headwinds, as customers increasingly drop its services in favor of cheaper over-the-top streaming services. The trend appears to be accelerating in the U.S., with the Leichtman Research Group indicating that the U.S. pay-TV market as a whole lost about 1.5 million net video subscribers in 2017, almost double the losses seen in 2016. Over Q1, AT&T’s satellite subscriber base declined by 188k, while its IPTV subscriber base grew by roughly 1k. However, the company streaming TV service DirecTV Now added 312k subscribers over the quarter, with the total subscriber base reaching ~1.5 million subscribers. Although margins on the service are unlikely to be attractive compared to linear TV offerings, with churn also being potentially higher, it could allow AT&T to hedge its broader TV business.
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