AT&T eats $ 15.5 billion depreciation charge as DirecTV debacle continues

AT&T lost 617,000 customers from DirecTV and its other television businesses in the last quarter of 2020, capping a year in which it lost nearly 3 million customers in the category, AT&T reported today.

AT&T also today informed the Securities and Exchange Commission that it has taken “non-cash impairment charges of $ 15.5 billion” related to its ongoing DirecTV debacle. AT&T said the $ 15.5 billion charge reflects “changes in our management strategy and assessment of the home video business … including our decision to operate our video business separately from our telephony operations. broadband and legacy. ” This operational decision “required us to identify a separate video reporting unit and assess both the recoverability of its long-lived assets and any goodwill attributed for impairment,” AT&T said.

AT&T said it also recorded “costs of approximately $ 780 million from the depreciation of production and other content stocks at WarnerMedia, $ 520 million from the continued shutdown of theaters during the pandemic and the model hybrid distribution for our 2021 film slate.

The fees were added to AT&T’s fourth quarter expenses. As a result, AT&T reported a net loss of $ 13.9 billion in the quarter, compared to net income of $ 2.4 billion there. a year ago. Fourth-quarter revenue was $ 45.7 billion, compared to $ 46.8 billion year-over-year. The fourth quarter net loss tipped AT&T to a full-year net loss of $ 5.4 billion.

Executives have called the non-cash accounting fee a sign of the aging pay-TV unit as the Dallas-based company promotes an Internet streaming model that gives its content production business a direct line with viewers, “The Wall Street Journal wrote today.

“Our biggest and most important bet is HBO Max,” said John Stankey, CEO of AT&T.

Premium TV customers flee en masse

AT&T now has just 16.5 million customers in the Premium TV category which includes DirecTV satellite, U-verse wired video and the new AT&T TV online service. That’s down from 17.1 million three months earlier and 19.5 million since the start of 2020.

AT&T has had several years of great loss of TV customers since early 2017, when it had more than 25 million users in the category. The loss of nearly 3 million customers in 2020 was an improvement over 2019, when AT&T lost 3.4 million Premium TV customers in the calendar year.

Those numbers don’t include the streaming service formerly known as DirecTV Now, which AT&T just killed off this month. The service has grown from 1.86 million subscribers in Q3 2018 to 656,000 by the end of 2020. Existing customers can keep this service, but AT&T is not offering it to new users.

DirecTV and U-verse customers have been driven out by years of price increases and reduced use of promotional offers by AT&T. This is reflected in AT & T’s average revenue per user (ARPU) in the Premium TV category, which fell from $ 121.76 per month at the end of 2018 to $ 131 at the end of 2019 and $ 137.64 at the end of 2020.

AT&T attributed the loss of 617,000 customers in the fourth quarter to “competition, lower gross additions due to continued focus on adding higher value-added customers and a scheduling dispute, partially offset by a decline. of the churn rate ”.

Video revenues down 11.2%

AT&T reported fourth quarter 2020 video revenue of $ 7.2 billion, “down 11.2% year-over-year due to lower premiums and [online] subscribers, partially offset by the rise in premium TV’s ARPU and higher advertising revenue in the general election. “The category’s operating expenses were $ 7.1 billion, leaving AT&T with a profit of $ 98 million.

AT&T does not report individual issues for DirecTV, U-verse TV, and AT&T TV. But the company said gains in AT&T TV streaming subscribers in the last quarter helped offset losses from DirecTV and U-verse, meaning DirecTV and U-verse together lost more than the loss of 617,000 customers. net in the Premium TV category.

AT&T said it was encouraged by the progress of HBO Max, which costs $ 15 per month on its own but is also included in various packages. “The release of Wonder Woman 1984 brought our national HBO Max and HBO subscribers to over 41 million, two years faster than our initial forecast,” Stankey said.

Sell ​​DirecTV at a loss

AT&T bought DirecTV for $ 49 billion in 2015, but has been trying to sell the besieged satellite division for a few months. AT&T is reportedly close to a deal to sell a stake in DirecTV to TPG, a private equity firm, but AT&T may retain a controlling stake in the company. The offers for DirecTV have reportedly valued the subsidiary at around $ 15 billion.

Fiber gains, DSL losses

AT & T’s broadband subscriber base remained stable at 14.1 million during the quarter. The company increased the number of fiber-to-premises subscribers from 4.68 million to 4.95 million in the fourth quarter of 2020, but increased from 8.98 million to 8.74 million in fiber to node and 440,000 to 407,000 in its obsolete DSL service. AT&T stopped accepting new DSL customers in October 2020.

AT&T said its broadband revenue for the fourth quarter was “$ 3.1 billion, down 1.4% year-over-year due to lower legacy services partially offset by the increase in IP broadband ARPU resulting from an increase in broadband fiber customers and pricing measures, operating expenses of $ 2.8 billion.