Video services

U-verse TV Growth Hits Skids

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.

For the latest on FTTP networks, visit Light Reading's broadband/FTTx content channel.

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

kq4ym 1/29/2015 | 2:18:49 PM
Re: Mission accomplished It is interesting that they have about 20% of the broadband and pay tv market. Nothing to sneeze at, but in this very competitive marketplace it will be interesting to see what will happen in coming years with U-verse and it's competitors playing against  Apple, Google, Roku and others.
MarkC73 1/28/2015 | 1:52:51 PM
Re: Mission accomplished


I'm in agreeance with you, though I haven't really put enough thought into it to have a strong stance, I definitely feel content is king, and now that will include content creation, (basically what you said).  The other thing I feel will be a key difference will be mobile integration, granted that OTT may equalize some of this, but if you control the systems for both content delivery and the mobile distribution, it should somehow be better.  For technology delivery like 4k, once one guy deploys the guys will deploy as well, however securing that content will be the issue.

brooks7 1/28/2015 | 11:16:27 AM
Re: Mission accomplished Dennis.

Other than the telco buildout, the last significant market share change in the Pay TV market was NFL Sunday Ticket.

So, either it will be a format that can do something that the other providers either can't or dont' (like all 4K channels) or some proprietary content.


mendyk 1/28/2015 | 10:44:54 AM
Mission accomplished When telcos were entering the video business years ago, we projected they'd end up with a market share of roughly 20 percent. And that's pretty much where they've ended up. Do you see any reason to think that share can or should go higher?
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