AT&T Inc.
T -0.94%
has set aside a $ 15.5 billion fee for its pay-TV business, reflecting the damage caused by the cable cut on its DirecTV satellite unit even as the company’s HBO Max streaming service has grown.
The decline in value created a loss in the fourth quarter, as the media and telecommunications giant weighs in on the potential sale of its pay-TV assets, and executives are focusing their investments on newer technologies. The company reported quarterly revenue declines in its old video and WarnerMedia units, offsetting gains in its main cordless division.
Executives have called noncash accounting fees a sign of the aging state of the pay-TV unit, as the Dallas-based company is promoting an internet streaming model that gives its content production company a direct line to viewers.
“Our biggest and most important bet is HBO Max,” John Stankey, chief executive, said Wednesday. The directors plan to expand the service’s footprint to other countries this year and launch an accepted version of advertising in the second quarter.
Overall, AT&T reported a fourth-quarter loss of $ 13.89 billion or $ 1.95 per share, compared to a profit of $ 2.39 billion or 33 cents per share a year earlier. Revenue fell 2.4 percent to $ 45.7 billion.
The coronavirus pandemic strained the company, pressuring revenue from cable networks such as CNN and TBS throughout the year and closing many of the cinemas that show its Warner Bros. movies. These withdrawals hid recent earnings from the company’s wireless service, which still generates more than half of the company’s profit.
The last three months of the year gave AT&T a net gain of 800,000 pay-per-view subscribers, an indicator closely watched by Wall Street. Rivals Verizon Communications Inc.
and T-Mobile USA Inc.
reported net gains of 279,000 and 824,000 such connections, respectively.
AT&T’s WarnerMedia revenue fell 9.5 percent to $ 8.5 billion, as the show business continued to struggle with low box office revenue and low advertising revenue. HBO’s business grew and ended the year with 42 million US 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 launch the entire Warner Bros. ‘2021 movies on HBO Max on the same day they hit theaters. Executives said the move would help the business cope with reluctant audiences to visit cinemas during a pandemic, while giving the studio’s sister streaming service a boost.
HBO Max exclusively online ended the year with 17 million activated accounts. It’s less than a year old, but it’s competing in a crowded global video streaming market, where Netflix Inc.
has already eclipsed over 200 million subscribers worldwide and Walt Disney Co.
Disney + reached almost 87 million subscribers in December.
Revenue from AT & T’s traditional video unit, which includes U-verse and DirecTV services, fell 11 percent to $ 7.2 billion in the fourth quarter. The business ended the year with 17.2 million internal connections, down from 20.4 million at the end of 2019.
AT&T held talks with suitors, including private equity firm TPG, which valued the video business at more than $ 15 billion, including debt. The fourth-quarter reduction reflects how the business has changed since AT&T bought DirecTV in 2015 for $ 49 billion, or $ 66 billion including debt.
The Wall Street Journal reported in August that AT&T turned to bankers to explore a deal to eliminate the rapidly shrinking business from its books. The transaction could allow AT&T to deconsolidate DirecTV’s aggravating financial results while maintaining a stake in TV.
Video losses weighed on AT&T shares, which missed the stock market rally. AT&T shares fell about 20 percent last year. Shares fell slightly to $ 29.47 Wednesday at noon.
The company forecast stability for 2021, forecasting adjusted base earnings in line with last year’s $ 3.18 per share result and revenue growth of about 1%, with a free cash flow of $ 26 billion. The company generated a free cash flow of $ 27.5 billion in 2020, a figure of directors highlighted as a sign of strength.
“The core business is doing well,” said AT&T Chief Financial Officer John Stephens. “This shows everyone the strength of our resilient customer base. Cash is not fictitious, it is real. As such, he is a true arbiter of value. ”
AT & T’s board of directors last month declined to raise the quarterly dividend after 36 years of rising payments. Payments to shareholders will continue to cost the company about $ 15 billion this year. The company’s recent financial forecast would allow it to continue to pay this amount until 2021.
The company enters the year with a list of new leaders. His longtime boss, Randall Stephenson, retired as chairman of the board earlier this month after stepping down as CEO in 2020. Mr Stephens plans to retire later this year.
AT&T is now run by Mr. Stankey. WarnerMedia Chief Financial Officer Pascal Desroches is set to take over as CFO later this year. William Kennard has long served as chairman and former chairman of the Federal Communications Commission.
Write to Drew FitzGerald at [email protected]
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