AT&T Misses on Q1 Revenue as WarnerMedia Falls Short, DirecTV Subs Continue to Slide

AT&T’s missed on the top-line with first quarter sales coming in under Wall Street targets. Its DirecTV division continued to bleed subscribers partially offset by 3.3% revenue growth at WarnerMedia, although sales in the media segment were lighter than analyst expectations.

The telco’s revenue for Q1 of 2019 was $44.83 billion, with net income of $4.10 billion (down 12% from $4.7 billion in the year-ago period). Adjusted earnings per diluted share were 86 cents. Wall Street analysts’ consensus estimates were revenue of $45.1 billion and EPS of 86 cents.

WarnerMedia revenue of $8.38 billion was up 3.3% year over year, below analyst estimates of $8.45 billion. Each division reporting operating income gains. Warner Bros. operating income was up 42.8% on theatrical revenue gains of 12.7% (largely from “Aquaman” carryover); Turner was up 7.0%; and HBO grew 6.0% year over year.

AT&T noted that the “Game of Thrones” season 8 premiere broke HBO’s viewership records, and that DC Entertainment’s “Shazam!” has already grossed more than $300 million worldwide.

Meanwhile, the AT&T Entertainment Group lost a whopping 544,000 net subscribers for DirecTV and U-verse TV, to stand at 22.4 million. It also dropped 83,000 DirecTV Now subs, to stand at 1.5 million over-the-top customers at quarter’s end, as AT&T ended promotional pricing and hiked rates for OTT subscribers.

Its key Mobility wireless segment generated revenue of $17.57 million (up 1.2% year over year), with a 4.5% decline in equipment sales offset by higher service revenue. Wall Street had pegged $17.65 billion in Q1 revenue for the segment. AT&T reported 179,000 postpaid smartphone net adds in the U.S. and 80,000 postpaid phone net adds.

“Our first-quarter results show that we’re delivering on what we promised,” Randall Stephenson, AT&T chairman and CEO, said in announcing earnings. “We’re on plan to meet our de-leveraging goals with strong free cash flow and asset sales.”

AT&T amassed billions in new debt in acquiring Time Warner, and the company has been seeking to offload assets to help pay that down. The telco sold the WarnerMedia office space in New York’s new Hudson Yards development for $2.2 billion, and sold its 9.5% stake in Hulu back to Disney and Comcast for $1.43 billion. AT&T’s long-term debt stood at $163.9 billion at the end of March.

In the first quarter, AT&T said, it cut its net debt by $2.3 billion and the company expects to have paid off about 75% of $40 billion in debt related to the Time Warner acquisition by the end of 2019.

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