AT&T Loses 22K U-Verse TV Subs in Q2

Promotions Focused on More Profitable, High-Value Subs
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In results that will likely add fuel to the cord-cutting debate, AT&T said it lose 22,000 U-verse TV subscribers, versus 190,000 net adds in the year-ago quarter.

However, AT&T, which ended Q2 with 5.97 million U-verse video subs and is closing in on its acquisition of DirecTV, did not chalk up that drop-off to cord-cutting but to typical “seasonality” seen in the period alongside the decision to target promotions to more profitable, higher-value subscribers.

On the U-verse video side, the first point to make is that the second quarter is always seasonally a challenge,” AT&T CFO John Stephens said on Thursday afternoon’s earnings call. “You’ve got a lot of relocations; you’ve got a lot of students returning from college. And with our limited footprint with regard to video capabilities, it’s always a challenge for us.”

The issue, he added, is to decide how much the company wants to pump into promotional activities that aim to stimulate growth. “We chose to be very disciplined and very limited in those promotional activities,” Stephens said.

While U-verse video dropped off, U-verse high-speed Internet remained strong, as AT&T added 241,000 subs in that category, extending its total to 12.9 million subs. AT&T said more than 90% of “IP-eligible subscribers” have its U-verse high-speed Internet product.

With DSL factored in, AT&T lost a total of 136,000 broadband subs, widened from a loss of 55,000 last year.

Stephens said U-verse services now account for more than 70% of consumer revenues, and that adjusted consumer U-verse revenues rose 19.2% year-over-year. More than 97% of AT&T’s video customers now take a bundle, and the ARPU for U-verse triple-play customer remains greater than $170.

Stephens said AT&T remains bullish on GigaPower, the telcos’s fiber-based platform that has been launched in 15 markets so far, most recently in Durham and Greensboro, N.C.

Stephens didn’t provide GigaPower sub numbers during the early stages of the deployment, but said AT&T is encouraged by the results so far.

“We are pleased with it,” he said. “The take rates, the satisfaction rates continue to outperform our expectations with our customers.”

Regarding the pending merger with DirecTV, Stephens reiterated that the company expects the deal to achieve $2.5 billion in cost synergies.

AT&T turned in an overall strong Q2, with revenues rising 1.4% to $33 billion, along net income of $3 billion and 69 cents per share that beat analyst expectations by six cents.

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