AT&T U-verse TV Hits the Skids

Like its prime cable rivals, AT&T is now in the uncomfortable position of losing video subscribers rather than gaining them.

AT&T Inc. (NYSE: T) reported late Thursday that it shed 22,000 U-verse TV subscribers in the second quarter, a far cry from the 190,000 video customers that it gained a year earlier. It also represents a marked reversal from even the more modest gain of 50,000 video customers that it realized in the first quarter.

As a result, AT&T ended the spring quarter with just under 6 million U-verse TV subscribers. That's still enough to make it the fifth-biggest pay-TV provider in the US, right behind such heavyweights as Comcast Corp. (Nasdaq: CMCSA, CMCSK), DirecTV Group Inc. (NYSE: DTV), Dish Network LLC (Nasdaq: DISH) and Time Warner Cable Inc. (NYSE: TWC). But it lost some ground to fellow telco Verizon Communications Inc. (NYSE: VZ), whose similar FiOS TV operation netted 26,000 video subscribers in the second quarter to close out June with nearly 5.8 million TV customers. (See FiOS Growth Slows, Verizon 'Custom TV' Soars.)

Despite the unprecedented loss of video subscribers, AT&T executives barely mentioned it and shrugged it off as no big deal on their earnings call with analysts. They attributed the video sub loss to several factors, including end-of-spring moves by students and other customers, deliberate cutbacks in price-related promotions and a heightened focus on higher-end customers and greater profitability.

"The second quarter is always seasonally a challenge," said AT&T CFO John Stephens. "With our current limited footprint and video capabilities, it's always a challenge for us."

Want to know more about pay-TV market trends? Check out our dedicated video services content channel here on Light Reading.

AT&T fared much better with its fiber-rich U-verse network on the broadband side, picking up 241,000 high-speed data subscribers to boost its subs total close to 13 million. But it still lost 136,000 broadband customers overall as its once-massive DSL subscriber base continued to shrivel at an even faster pace. The company, which once had as many as 14 million DSL customers, now has just 1 million left to try to convert over to the newer IP platform.

"We only have 1 million left," Stephens said. "It's a very different pool to draw from."

Even with such mixed customer metrics, AT&T enjoyed a healthy surge in both U-verse consumer revenues and overall wireline consumer revenues for the quarter. Adjusted U-verse consumer revenues climbed to $4.1 billion, up 19.2% on a year-over-year basis; while adjusted wireline consumer revenues rose a more modest 3.7% from the year-ago period. Stephens credited these gains to AT&T's "very disciplined" pricing strategy and "very limited" sales discounts and promotions.

Taking note of AT&T's pending $48.5 billion purchase of DirecTV, which is now heading for almost certain approval by the Federal Communications Commission (FCC) , Stephens said AT&T officials are eager to close the deal and start the company "transformation" that the merger will bring. Despite the various merger conditions that FCC Chairman Tom Wheeler intends to impose on the new AT&T. Stephens said company executives "still fully expect to achieve" the $2.7 billion in cost synergies they have promised to investors. (See Wheeler Blesses AT&T-DirecTV Deal .)

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

MikeP688 7/25/2015 | 5:15:09 PM
Now that AT&T & DirectTV are one!! :-) The question we should all be curious about is what would AT&T do with this franchise it has acquired.  Will it eventually move all to UVERSE?   One curious thing is the "why"?  I would suspect it is indeed part and parcel of the broad trend of "Cord-Cutting" that is the trend which we've deliberated here.     
mendyk 7/24/2015 | 3:38:30 PM
Re: Where's the future Actually, AT&T is still adding to its broadband count, according to Alan's story.
mendyk 7/24/2015 | 3:37:17 PM
Re: Where's the future Satellite operators have no real options, but broadband service providers see clearly superior margins in services other than conventional video packages. And at some point, consumer choice does play a role in the success or failure of these services, which is why by some accounts ESPN has lost about 7% of its user base just in the past year. (That's not ratings, that's the number of subscribers for which ESPN gets paid by video service providers.)
brooks7 7/24/2015 | 2:59:03 PM
Re: Where's the future You would have to add in satellite before we make statements about linear TV decline.


Mitch Wagner 7/24/2015 | 2:16:50 PM
Where's the future So if AT&T is losing video subscribers and broadband subscribers, I take it they see their future as mobile? And maybe premium video and broadband as well – make up in margins what they lose in volume?

If video subs are going down for cable companies as well as AT&T, does that mean cord-cutting and AT&T is taking a real bite out of other video? I've thought of those as potential threats, but it seems the threat has become real. 
Ariella 7/24/2015 | 1:46:01 PM
Re: Quarterly chuckles @mendyK so long as people accept that, they'll be less gloomy about the future, as it's all about how things measure up to expecations. 
mendyk 7/24/2015 | 1:26:37 PM
Re: Quarterly chuckles It's direct evidence that video service providers are in fact de-emphasizing those packages. But we're trained to think that anything that isn't growing is headed down the road to catastrophe. The plain and obvious truth is that, at least in the US, the pay-TV market has plateaued and will show a long and lingering decline.
Ariella 7/24/2015 | 12:10:47 PM
Re: Quarterly chuckles @mendyK so should we call this a necessary adjustment, rather like they do for the stock market?
mendyk 7/24/2015 | 8:16:24 AM
Quarterly chuckles These quarterly posts on video service performance are amusing in a way. There's a growing body of evidence that video service providers are pulling back on emphasizing these offerings because of price/margin issues, which is more than understandable. And yet when the numbers come out to reflect this trend, we get a bit of "the sky is falling" interpretation. The sky ain't falling -- it's just that the sun is very gradually but unmistakeably setting on the 20th-century video service delivery model.
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