AT&T’s Stephens: DirecTV Integration ‘On Track’

Talks up Merger Synergies on Q3 Call
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AT&T’s merger with DirecTV provides a platform of mixed distribution methods for video, but the company spent a good part of its third quarter earnings call Thursday talking up the synergies of the deal.

“The integration of DirecTV is…on track,” AT&T CFO and SVP John Stephens (pictured) said. “We expect to meet or beat our $2.5 billion cost synergy target, and we're just beginning to unleash potential promotional activities to drive bundled sales.”

As for the early focus of those synergies, he said AT&T is now selling DirecTV service in most of its 2,200-company-owned stores (viewed as a “first line of synergy”), and the next step will be to extend that to certified dealers, via online sales channels and “ramping up” of sales in call centers. Some of those stores, he said, had never sold a video product before.

AT&T is also expanding training for installers so they can provide U-verse services as well as DirecTV. By November, AT&T expects to have an initial batch of techs ready to support a single truck-roll installation for broadband and video services.

“It's important that we do this right coming out of the gate,” Stephens said. “We've been holding back much of our cross-selling promotions as we train service reps and technicians for a premium single-service experience, so we will see the benefit of those strategies impact future quarters.”

He said the early results of the integration “indicate this deal will prove to be everything we thought it would be, and more.”

While DirecTV added subs in Q3, U-verse video subs declined, which AT&T said was expected.  

Stephens said that that was due in part to focusing on the “low-cost platform” as its first choice for net adds, and that a new focus on profitability has caused AT&T to steer away from promotional pricing and cost-sensitive customers who have a “propensity to churn.”

“We still have a solid, very good, very high-quality customer base in U-verse…We're focused on lowering churn and keeping those customers quite satisfied,” Stephens said.

Stephens also discussed AT&T’s ongoing DSL subscriber losses, and was hopeful that DirecTV can help out in that area too.

“These [DSL subs] were generally out of the U-verse footprint,” he said. “And now we'll be able to provide them with a video offering through DirecTV…We are hopeful that now this nationwide video service will help us in improving our overall broadband positioning.”