AT&T Inc.’s pay-television business continued to hemorrhage customers, adding to pressure as the company readies its own entrant into the increasingly crowded video streaming market.
The Dallas company lost 945,000 satellite and fiber-optic TV subscribers during the last three months of 2019, while its online channel bundle AT&T TV Now shed 219,000 customers.
AT&T vaulted to the top of the pay-TV rankings in 2015 when it bought DirecTV, but that business lost about 4 million subscribers over the past year as many turned to more flexible and less expensive entertainment options.
The company ended 2019 with 20.4 million domestic pay-TV subscribers, dropping behind cable giant Comcast Corp. ’s 21.2 million video customers.
AT&T’s core mobile phone business fared better, adding 229,000 postpaid phone subscribers while losing 20,000 prepaid phone customers in the fourth quarter. Postpaid customers billed for service at the end of the month are considered lucrative for carriers because they are less likely to switch providers.
AT&T ended the year with more than 93 million domestic wireless connections, excluding connected devices such as tablets and lines sold through resellers.
The company’s overall fourth-quarter profit hit $2.39 billion, or 33 cents a share, down from $4.86 billion, or 66 cents a share, over the same period a year earlier. Total fourth-quarter revenue fell 2.4% to $46.82 billion.
Shares of AT&T slipped about 1% in premarket trading. The shares have rallied over the past year as the company has promised to pay down debt levels and streamline its operations.
AT&T still earns slightly more than half its overall profit from customers on its wireless network. That business showed little damage from promotions that grew more aggressive near the end of the year, according to industry executives. Rival T-Mobile US Inc. added 1 million postpaid phone customers in the fourth quarter, while Sprint Corp. reported a 115,000 loss. Verizon Communications Inc. is scheduled to post its results Thursday.
Revenue from WarnerMedia, a collection of media assets AT&T acquired in 2018, fell 3.3% to $8.92 billion. Gains at HBO and the company’s Turner cable channels were eclipsed by revenue declines at Warner Bros. studios. The company said it reaped less cash from licensing fees as it stockpiled content for HBO Max, an on-demand video service AT&T plans to debut in May.
U.S. cable and satellite companies are struggling with a snowballing cord-cutting problem, though AT&T’s 2019 customer losses outstripped declines at cable rivals like Comcast. AT&T has said the DirecTV subscriber losses have been driven by its decision to pull back on aggressive promotions to focus on more profitable customers.
HBO Max will combine the premium cable channel’s original TV series with Warner Bros. movies and licensed reruns of popular shows such as “The Big Bang Theory” and “Friends.” It will build on an already valuable base of HBO subscribers, who can switch free to the expanded library, but faces an increasingly crowded field that includes fresh streaming video services from Apple Inc., Comcast and Walt Disney Co.
The quarterly results come after AT&T reached an October truce with hedge fund Elliott Management Corp. that committed the telecom and media giant to a three-year streamlining plan.
The strategy, some elements of which AT&T executives said were already being considered, included a stock-buyback plan to boost its share price and a plan to cut costs.
The company spent $2 billion to buy back 51 million of its own shares during the fourth quarter and allocated another $4 billion to repurchase shares starting in January. Executives have said the company will continue to boost its share price by reducing the amount of common stock available to the public, though the heaviest buybacks were front-loaded around the beginning of 2020.
The company also agreed to name two new board members while reviewing many of its portfolio of assets, a response to critiques in a letter the investment fund sent in 2019.
AT&T said it reduced its net debt by $7.6 billion in the fourth quarter and more than $20 billion in the full year. It ended 2019 with $151 billion of net debt. The company reiterated its financial targets for 2020, which include 1% or 2% revenue growth with about $28 billion in free cash flow.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
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AT&T’s Fourth-Quarter Results Dragged Down by TV Business - The Wall Street Journal
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