AT&T books raise $ 15.5 billion on DirecTV unit

Managers call the noncash accounting costs a sign of the aging status of the pay-TV unit, as the Dallas company promotes an Internet streaming model that gives its content production business a direct line for viewers.

“Our biggest and most important bet is HBO Max,” CEO John Stankey said during a conference on Wednesday. Managers plan to expand the service’s footprint in other countries this year and launch a version that will be advertised in the second quarter.

Overall, AT&T posted a loss of $ 13.89 billion or $ 1.95 per share in the fourth quarter, compared to a profit of $ 2.39 billion, or 33 cents per share, a year earlier. Revenue fell 2.4% to $ 45.7 billion.

The coronavirus pandemic has gripped the company and put pressure on cable networks such as CNN and TBS throughout the year, closing many of the theaters showing its Warner Bros. films. These withdrawals have obscured the recent gains in the company’s wireless service, which still yields more than half of the company’s profits.

In the last three months of the year, AT&T paid a net profit of 800,000 subscribers over the phone, a measure that Wall Street kept a close eye on. Competitors Verizon Communications Inc.

and T-Mobile USA Inc.

reported net gains of 279,000 and 824,000 such compounds, respectively.

Revenue from AT & T’s WarnerMedia division fell 9.5% to $ 8.5 billion as the show business side continued to struggle with low box office revenue and poor advertising revenue. The HBO business grew and ended the year with 42 million U.S. subscribers, a figure that includes older cable plans as well as the new online service.

AT & T’s media division stunned Hollywood last year with a plan to oust all Warner Bros. to release. ‘2021 films on HBO Max the same day they hit theaters. Executive officials said the move would help the company deal with the public who are reluctant to visit theaters during a pandemic, while giving the sister’s streaming service to the studio an extra boost.

The HBO Max service, which was offered online only, ended the year with 17 million activated accounts. It’s not yet a year old, but competing in a global global streaming video market where Netflix Inc.

has eclipsed more than 200 million subscribers worldwide and Walt Disney Co.

Disney + reached nearly 87 million subscribers in December.

Revenue from AT & T’s traditional video unit, which includes U-verses and DirecTV services, fell 11% to $ 7.2 billion in the fourth quarter. The business ended the year with 17.2 million domestic connections, compared to 20.4 million at the end of 2019.

AT&T has been negotiating with suitors, including private equity firm TPG, which has valued the video business at more than $ 15 billion, including debt. The write-off of the fourth quarter reflects how the business has changed since AT&T bought DirecTV in 2015 for $ 49 billion, or $ 66 billion, in debt.

The Wall Street Journal reported in August that AT&T had advised bankers to investigate a deal to take the fast-shrinking business out of its books. The transaction could enable AT&T to consolidate DirecTV’s deteriorating financial results while retaining a stake in the TV company.

The video losses outweighed the AT&T shares, which missed the stock market rally. AT&T shares fell about 20% last year. Shares declined slightly at $ 29.47 on Wednesday afternoon.

The company predicted stability for 2021, forecasting core adjusted earnings in line with the result of $ 3.18 per share last year and revenue growth of around 1%, with $ 26 billion in free cash flow. The company generated $ 27.5 billion in free cash flow in 2020, which is a figure as a sign of strength.

“The business is doing well,” said AT&T chief financial officer John Stephens. “It shows everyone the power of our resilient customer base. Cash is not fictitious, but real. As such, it is a true arbitrator of value. ”

AT & T’s board did not want to increase the quarterly dividend last month after 36 years of growing payouts. The payments to shareholders will cost the company another $ 15 billion this year. The company’s recent financial forecast will make it possible to continue paying the amount until 2021.

The company enters the year with a slew of new leaders. Longtime boss Randall Stephenson retired as chairman of the board earlier this month after stepping down as CEO in 2020. Stephens plans to retire later this year.

AT&T is now led by mr. Stankey. WarnerMedia chief financial officer Pascal Desroches will take over as chief financial officer later this year. The longtime director and former chairman of the Federal Communications Commission, William Kennard, is taking over the chairmanship.

Write to Drew FitzGerald by [email protected]