AT&T Explains Continuing MVPD Sub Losses

(Satellite Business News) — AT&T yesterday tried to explain the almost 400,000 net losses to its video service in the third quarter of this year, offering at points somewhat conflicting reasons for the drop.

As reported, AT&T previously told the SEC it lost 390,000 net video subs in the quarter, but that its DirecTV Now service added 300,000 net customers.

In its SEC filing yesterday, AT&T said its DirecTV DBS service accounted for 251,000 of those net subscriber losses in the quarter.

AT&T’s U-verse wireline video service lost 134,000 net customers in the quarter, the company said.

Furthermore, AT&T put the net additions for DirecTV Now at 296,000 in the third quarter. Given those results, the DirecTV DBS service had 20.65 million subscribers as of Sept. 30. The DirecTV Now service, AT&T said, had 787.000 subscribers.

The U-verse ended the period with 3.691 million customers. That service has seen the steepest declines of any AT&T service.

In the last 10 quarters, or 30 months, U-verse has lost 2.254 million net video subscribers. AT&T had indicated that it was converting U-verse customers to its DBS service, which has far lower wholesale programming costs, though it has also moved some U-verse subscribers to the DirecTV Now service as well.

The transition of U-verse to DBS customers reached as high at 70 percent of DBS net add in the past, AT&T said, but it has recently stopped offering that percentage.

During a conference call with analysts yesterday, AT&T Chief Financial Officer John Stephens said the migration of U-verse customers to either of the DirecTV services “is something we intended.”   

The net declines in video subscribers at the DirecTV DBS and U-verse services, Stephens said, were attributable to two main factors: the company’s “decision to tighten [its credit] policy” and disconnecting customers who have not been paying their bills; and the “severe storms” that hit Florida, Texas, Puerto Rico, and the U.S. Virgin Islands.

Stephens claimed that “nearly half” of the net declines at DirecTV and U-verse could be traced to the bad weather, a figure which startled some observers and analysts.

Most video subscribers in Florida have had their service to various video offerings restored, and most in Texas also have.

Moreover, Puerto Rico has not seen major satellite TV growth for either DBS service in some time, and there are only a small roster of independent satellite retailers left on that island.

Stephens also said AT&T “expect[s] a net addition” of total subscribers to its three video services combined in the fourth quarter— which also puzzled some with regard to the credit worthiness and payment disconnection statements.

Stephens also said revenues for the AT&T’s entertainment group, which housed the video services in the quarter, “were slightly down.” Since AT&T has repeatedly said its DBS service has higher operating margins because of its lower wholesale programming costs, that led some to wonder if the low margins at the on-line service were having an adverse impact on the financial results of the DBS business.

Meanwhile, AT&T said its services in Mexico, Latin, and South America ended the quarter with 13.4 million subscribers. Combined with the 25.1 million domestic subscribers, AT&T said it ended the quarter with some 38.6 million video customers.

In another result which might catch some eyes, AT&T said it recorded $33 million more in merger related costs associated with its pending Time Warner purchase in the third quarter, bringing that amount for the year to $152 million.

The company also recorded $67 million in other video integration and merger related costs in the quarter—presumably still related to its acquisition of DirecTV more than two years ago—and has spent a total for the year on that accounting line to $317 million.

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