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AT & T Inc.'s new show-business assets outsourced its larger telecommunications divisions in the latest quarter, boosting earnings despite a record slump in satellite-TV subscriptions.
The Dallas company's third-quarter profit rose to $ 4.72 billion, helped by customer growth in its cellphone business, more subscribers at HBO and growing revenue from its slate of Turner TV channels.
But the company lost a record 359,000 DirecTV satellite customers in the quarter, which dwarfed 13,000 video subscriber additions at U-verse and 49,000 new customers at DirecTV Now, a cable-like bundle of channels offered online.
DirecTV Now's growth slowed down in the first quarter. Some of that a new strategy to avoid chasing a bargain-hunting customers who use the service for a few months to follow a particular TV series or sport.
AT & T Communications Chief Executive Executive Director John Donovan said on a conference call with analysts, referring to DirecTV Now. "We have learned a lot from our two million customers about customer behavior and price elasticity."
Shares dropped 6.1% to $ 31 Wednesday. The stock is more than 20% this year.
AT & T's wireless core business gained a net profit of 69,000 subscribers on postpaid phone plans. The company added 481,000 net prepaid phone subscribers. Total domestic prepaid and postpaid subscribers reached 93.9 million, up from 93.6 million in the previous quarter.
That followed similarly strong results at rival Verizon Communications Inc., which on Tuesday said it netted 295,000 new postpaid phone connections over the same period. Most cellphone carriers have experienced this year.
Most of AT & T's profits, but the company has been aggressively in advertising and entertainment. In June, it spent more than $ 80 billion for the owner of the Warner Bros. TV channels like CNN, HBO and TBS. AT & T renamed the business WarnerMedia.
The three months that ended Sept. 30 were the first one under the telecom company's ownership and helped boost its bottom line. Operating income climbed 11% due to subscriber growth at HBO and 13% at the Turner TV unit.
AT & T's overall profit rose to $ 4.72 billion, 65 cents a share, up from the $ 3.03 billion, or 49 cents a share it earned a year earlier without WarnerMedia. Its revenue climbed to $ 45.74 billion from $ 39.67 billion a year ago.
Chief executive Randall Stephenson told investors in September that he would pay a flat rate for the next year, but he said the loss-making division that holds DirecTV would not stabilize until next year.
Traditional TV channel subscriptions are falling into the real world. Those packages tailored to "cord-cutters" tend to be less profitable for their providers than satellite and cable.
Write to Drew FitzGerald at [email protected]
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