Cord-cutting is accelerating in the US, underscoring the urgency of AT&T’s push into online streaming. But the streaming wars are expensive.
These forces weighed on AT&T’s latest financial results, as its entertainment business WarnerMedia revealed on Wednesday that it took a $1.2bn hit due to costly investments in its upcoming streaming service to rival Netflix.
The weaker results at WarnerMedia dragged down AT&T’s overall revenues, which fell to $46.8bn in the fourth quarter — down 2.4 per cent from a year ago and lower than analyst forecasts for $46.9bn.
At the same time, AT&T revealed more bad news for its traditional television business, as consumers ditch their cable boxes in favour of online alternatives. The Texas-based company haemorrhaged 945,000 premium video customers in the fourth quarter. Altogether in 2019 it lost more than 4m total video subscribers.
AT&T’s fortunes have been boosted by strength in its core wireless phone business. In the fourth quarter, the Texas-based group added 229,000 net new “postpaid” subscribers who pay monthly bills, well ahead of the 83,000 expected by analysts.
“If wireless improves and pay-TV stabilises, AT&T could be worth close to $60,” said Jonathan Chaplin at New Street Research. “However, if pay-TV pressures get worse, the stock will struggle.”