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AT&T Loses 1.16M Video Subs in Q4, 4.09M for All of 2019

Don't blame AT&T if it says, "good riddance" to 2019 with respect to its struggling pay-TV business.

Hoping that the worst is behind it now, AT&T reported that it lost a total of 1.16 million video subs in Q4 2019 -- 945,000 "premium" subs (DirecTV satellite and U-verse customers) and 219,000 OTT customers. For all of 2019, AT&T lost 4.09 million total video subs -- 3.43 million premium TV customers and 665,000 OTT subs.

With the bulk of video subs that were on deep discounts and promotions having left the stable, AT&T expects video losses to narrow in 2020 and more closely reflect the rate of loss suffered by the rest of the US pay-TV industry. AT&T also expects video subscriber improvements this year as it pushes ahead with a strategy to drive penetration of its fiber-based broadband service and pair it with its new OTT-based AT&T TV service along with HBO Max, a super-sized subscription VoD service that's on track to launch in May.

AT&T TV "will really hit its stride" by Q2 2020, John Stankey, the COO of AT&T and CEO of WarnerMedia, said Wednesday on the company's Q4 earnings call. AT&T TV, an OTT service that relies on an Android TV-based client device, is currently available in more than a dozen US markets and is expected to become available nationwide sometime next month.

Fiber adds not enough to offset a broader broadband decline
AT&T also acknowledged that video losses had a detrimental effect on its overall broadband business in Q4.

The bright spot was AT&T's fiber broadband business, which added 191,000 subs in Q4 2019, though still down from the 259,000 additions in the year-ago quarter. AT&T ended 2019 with 3.88 million fiber broadband subs.

But those fiber adds were not enough to avoid an overall sub loss for its broader "IP" broadband category, which includes the fiber and U-verse Internet numbers. AT&T lost 141,000 "IP" broadband customers (versus a loss of 6,000 a year ago) in Q4, ending 2019 with 13.59 million in the category. AT&T also lost another 41,000 DSL subs in Q4, lowering that base to just 521,000. However, the addition of fiber customers helped AT&T's broadband average revenue per user (ARPU) climb to $51.36, versus $49.83 in the year-ago quarter.

Stankey said AT&T plans to emphasize its fiber footprint, which now covers some 14 million residential locations (20 million with business locations included), as part of the company's three-year plan. He said the company expects to exit 2022 with more than 3 million more fiber subs than it has today, extending that total to about 7 million.

The question moving forward is whether AT&T's fiber adds will come from upgrades of current broadband customers on older access network technologies or by stealing market share from cable operators. Recent analysis indicates that the bulk of AT&T's fiber subs come from upgrades of the company's existing broadband base.

Regardless, expect AT&T to use its fiber product and faster speeds to help it "lean into video acquisition" involving the company's new OTT-delivered AT&T TV service, Stankey said.

Pairing AT&T TV with the fiber broadband product "is a more natural combination" than the matching of fiber broadband with the satellite-based DirecTV product, he said.

Stankey also provided an update for HBO Max, the new SVoD service that's set to launch in May for $14.99 per month and offer about two times the amount of content available on the traditional HBO service.

Part of the plan is to convert about 30 million legacy HBO subs to HBO Max. Although HBO Max will be offered as a standalone product, AT&T intends to distribute it through pay-TV partners as well. Stankey said he's in "active discussions" with digital video players and traditional multichannel video programming distributors about HBO Max, and expects to announce some deals before HBO Max debuts in May.

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— Jeff Baumgartner, Senior Editor, Light Reading

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