Comment (4)Like many cable operators and satellite TV providers before it, AT&T U-verse has started applying the brakes to its growth pace because of concerns about low profits and high customer churn.
AT&T Inc. (NYSE: T) reported late Tuesday that it netted just 73,000 U-verse TV subscribers in the fourth quarter, a far cry from the 194,000 video customers it added a year earlier. Moreover, that's an even steeper decline from the 216,000 U-verse TV subscribers that AT&T gained in the third quarter. (See U-verse Growth Slows, but Still Gaining.)
On the company's earnings call, AT&T officials mostly downplayed the much lower video gains while emphasizing U-verse's continuing strong performance on the broadband front. But, acknowledging the unexpected slowdown, they blamed it on a "strategic move to improve profitability" by focusing on higher-end, less price-sensitive subscribers with lower churn rates.
AT&T still ended 2014 with more than 5.9 million U-verse TV customers, up nearly 500,000 customers for the year. That's easily enough to make it the fifth-largest pay-TV provider in the US, after 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).
Plus, those numbers would be even higher if it weren't for AT&T's $2 billion sale of its Connecticut operations to Frontier Communications Corp. (NYSE: FTR) last year. In that transaction, AT&T gave up nearly 200,000 U-verse TV subscribers to Frontier.
Nevertheless, the fall slowdown could be a sign that U-verse TV's growth strategy is moving into a new, more mature phase, as the company focuses more on profit margins than sheer revenues. As a result, AT&T may not keep stealing video subs away from cable and gaining rapidly on the leading MSOs.
The fourth-quarter story was quite different on the broadband side. AT&T reported that U-verse Internet enjoyed another strong season, adding 405,000 high-speed data subscribers. With this latest gain under its belt, U-verse ended up adding 2.1 million broadband subs for the full year even with the transfer of almost 300,00 Connecticut data customers to Frontier, boosting its total to 12.2 million.
Overall, AT&T still managed to lose 51,000 broadband subscribers in the fourth quarter, due to its continuing heavy losses of DSL customers, reducing its broadband total to about 16 million. But company officials shrugged off those losses as part of the necessary transition from their legacy copper networks to new fiber plant.
With its fiber footprint covering 57 million homes and businesses across the US, AT&T said U-verse TV's penetration rate now stands at 22% of homes marketed while U-verse Internet's penetration rate sits at 21% of homes marketed. Plans call for extending the fiber footprint to 70 million customer locations.
— Alan Breznick, Cable/Video Practice Leader, Light Reading
