How Does AT&T Make Money?

by Trefis Team
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In this note, we discuss the revenue segments of AT&T (NYSE: T), their historical performance, and expected trajectory over the next two years. You can view our interactive dashboard analysis ~ AT&T Revenues: How Does AT&T Make Money? ~ for more details.

What Are AT&T’s Key Business Segments?

Communications: This segment includes Mobility which provides wireless service and equipment, Entertainment and Business Wireless which provides video, internet, and voice communications services to residential customers and business customers, respectively.

Warner Media: It develops, produces, and distributes feature films, television, gaming and other content over various physical and digital formats.

Latin America Segment: It provides Pay TV services in Latin America and wireless service and equipment in Mexico.

Xandr: It provides advertising services.

What Are The Alternatives?

Wireless Carriers: Verizon Wireless, Sprint and T-Mobile, and regional carriers such as U.S. Cellular and C-Spire.

Video/Broadband: América Móvil and Telefónica

Legacy Voice and Data: Orange Business Services, BT, Singapore Telecommunications Limited, and Verizon Communications Inc

Media: Disney, Viacom, CBS, Netflix, Comcast, Apple, Amazon

 

Revenues have grown 4% from $163.7 billion in 2016 to $170.7 billion in 2018, we expect this growth rate to increase by 7% over the next two years.

1) Communications revenues are expected to drop by 3% in 2019

This segment’s revenues have declined by 3% over the last two years –from $154.2 billion in 2016 to $144.6 billion in 2018, we expect this trend to continue in the next two years as well, due to declining revenues from Entertainment segment and Postpaid subscriptions.

  • Declines in Entertainment and Business Wireline segments over the years were driven by continued declines in legacy voice and data products, shifts to over-the-top (OTT) video offerings, and change to unlimited wireless plans and lower wireless handset sales and upgrades.
  • Postpaid revenues declined due to falling average revenue per user (ARPU).
  • We expect this trend to continue driven by lower price plans and promotional activities.

(1.1) Postpaid Revenues Could Decline 4% In Next Two Years On the Back of Growing Competition

2) Warner Media is expected to cross $33 billion by 2019.

Time Warner’s acquisition in 2018 led to this segment. We expect growth on the back of box-office revenues and licensing fees.

3) Latin America Segment could decline by 9% in 2019

We expect the growth rate to slow down due to foreign exchange pressures offset by related pricing actions.

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