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Pay-TV Cord-Cutting Slams AT&T

Alan Breznick

Cable operators aren't the only ones fighting the fierce cord-cutting monster. Satellite TV and telco TV providers are grappling with the beast too, as the latest results from AT&T make abundantly clear.

In an 8-k filing late Wednesday, AT&T Inc. (NYSE: T) revealed that it expects to report a whopping loss of 390,000 "traditional" video subscribers in the third quarter, combining the sub losses from its DirecTV satellite TV business and U-verse wireline TV unit. That will easily more than offset the 300,000 video customers that the company expects to pick up from its nearly year-old, and much less profitable, OTT video service, DirecTV Now, leaving it with an overall loss of 90,000 video customers for the summer quarter.

Notably, AT&T, which was severely impacted by hurricanes and flooding in Texas, the Southeast and Puerto Rico near the end of the quarter, did not pin most of the blame for the video subscriber losses on those natural disasters. Instead, the largest US pay-TV provider cited "heightened competition in traditional pay-TV markets and over-the-top video services" as the leading cause, followed by the three hurricanes and "our stricter credit standards."

What these results clearly indicate is that "DirecTV, like all its cable peers, is suffering from the ravages of cord-cutting," not increased competition from cable operators, Craig Moffett, partner and senior analyst at MoffettNathanson LLC , said in a research note to investors last night. "The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other." (See Are Cord-Cutting's Days Numbered?)

Based on these results and the heavier video subscriber losses recently reported by Comcast, Moffett added that it's "reasonable to expect a weak third quarter for the whole pay-TV industry."

Further, Moffett argues that "it is becoming increasingly clear that the wheels are falling off" the satellite TV industry. Thus, he expects Dish Network LLC (Nasdaq: DISH), which has already been seeing satellite TV subscriber losses by the boatload, to report poor third-quarter results as well. Moffett also contends that DirecTV's "weakness" makes the much-speculated idea of AT&T acquiring Dish Network "all but unthinkable.” (See Analysts: Dish Is in Dire Straits.)

Despite suffering the video subscriber losses and the damage wreaked by the recent hurricanes in the US and earthquake in Mexico, AT&T stood by its earlier full-year financial guidance of adjusted earnings growth in the mid-single digits, capex in the $22 billion range and free cash flow near the low end of its $18 billion range. But the company said the network and property damage, service restoration costs and waived charges will likely cause its Q3 consolidated revenues to fall nearly $90 million, with pre-tax earnings of about $210 million (or two cents per diluted share).

— Alan Breznick, Cable/Video Practice Leader, >Light Reading

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Austin Idol
Austin Idol,
User Rank: Moderator
10/12/2017 | 2:34:51 PM
Re: Options
Uhhhhhhhh Derrrrrrrrrr..................
User Rank: Light Sabre
10/12/2017 | 12:45:35 PM
There are tons of streaming options out there, and people are willing to pay for them. Oftentimes I think customers are paying more for all these services together than what a cable bill might be. But it's about choice. 
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