DALLAS -- “It was an exciting quarter for AT&T as we completed the acquisition of Time Warner on June 14 and created a modern media company built around premium content, 170 million direct-to-customer relationships, advertising technology and high-speed networks,” said Randall Stephenson, AT&T chairman and CEO.
“Time Warner joins us coming off an impressive second-quarter. Turner turned in solid subscription and advertising revenue growth, Warner Bros. is in high gear with a record number of series in production, and HBO delivered strong subscriber revenue growth.
“Since we closed the Time Warner deal, we’ve also announced an agreement to acquire ad-tech leader AppNexus, which will be an important step to strengthen our leadership in advanced TV advertising.
“Our goal is to reshape the way media and entertainment work for consumers, and you will see us continue to do exactly that.”
AT&T Inc. (NYSE:T) reported solid wireless results in the second quarter, including postpaid phone gains, continued strong prepaid phone growth and stable postpaid churn. On a GAAP basis, service revenue declined; however, on a comparable basis service revenue grew. Including the acquisition of Time Warner in mid-June, AT&T reported consolidated revenue growth on a comparable basis, which offset pressure from its entertainment and business segments, and strong earnings and free cash flow growth.
Strong subscriber gains:
U.S. wireless results:
Entertainment Group results:
Time Warner acquisition closed on June 14; full second-quarter results include:
Consolidated Financial Results
The company’s consolidated results include 16 days of Time Warner results for the second quarter. Time Warner’s total second-quarter results on a historical basis are located on AT&T’s Investor Relations website. Pro forma schedules are expected to be filed in August.
AT&T’s consolidated revenues for the second quarter totaled $39.0 billion versus $39.8 billion in the year-ago quarter, primarily due to the impact of ASC 606 which included netting of approximately $900 million of USF with operating expenses. On a comparative basis, declines in domestic video and legacy wireline services were offset by adding approximately $1.1 billion from Time Warner net of eliminations and growth in wireless, strategic business services and advertising. On a comparative basis, revenues were $39.9 billion, an increase of 0.2% primarily due to the second-quarter close of the Time Warner acquisition.
Operating expenses were $32.5 billion versus $33.3 billion, primarily due to the netting of USF and other regulatory fee revenues and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $34.0 billion, an increase of about $700 million due to inclusion of Time Warner results, content cost pressure and higher wireless equipment costs partially offset by cost efficiencies.
Versus results from the second quarter of 2017, operating income was $6.5 billion, stable versus the year-ago quarter; and operating income margin was 16.6% versus 16.4%. On a comparative basis, operating income was $5.9 billion and operating income margin was 14.8%. When adjusting for a non-cash actuarial gain on benefit plans, amortization, merger- and integration-related expenses and other items, operating income was $8.2 billion, or $7.7 billion on a comparative basis, versus $8.1 billion in the year-ago quarter and operating income margin was 21.1%, or 19.2% on a comparative basis, versus 20.3% in the year-ago quarter.
Second-quarter net income attributable to AT&T was $5.1 billion, or $0.81 per diluted share, versus $3.9 billion, or $0.63 per diluted share, in the year-ago quarter. Adjusting for a $0.21 non-cash actuarial gain on benefit plans and $0.31 of costs for amortization, merger- and integration-related expenses and other items, earnings per diluted share was $0.91 compared to an adjusted $0.79 in the year-ago quarter, a 15.2% increase.
Cash from operating activities was $10.2 billion, and capital expenditures were $5.1 billion. Capital investment included about $275 million in FirstNet capital costs and reflects about $300 million in FirstNet reimbursements. Free cash flow — cash from operating activities minus capital expenditures — was $5.1 billion for the quarter.
AT&T expects in 2018: