AT&T Keeps Adding Subscribers and Selling Assets. Earnings Beat Forecasts.

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AT&T is selling assets to rise currency to put successful telecom infrastructure and wage down debt.

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AT&T is connected a rotation with subscriber maturation and income of its noncore assets. In a brace of announcements, the media and telecom elephantine reported a robust 2nd 4th of customer growth, revealed its latest divestiture, and added higher nett guidance for the existent year.

But tempering that bully quality Thursday was a multibillion-dollar plus write-down and the information that the strongest show comparative to expectations successful the 4th came from WarnerMedia and HBO Max. AT&T is successful the process of spinning disconnected some businesses.

AT&T banal (ticker: T) was level astatine $27.90 Thursday morning, giving up a summation seen successful premarket trading. Rival Verizon Communications (VZ) reported a similar beat-and-raise quarter connected Wednesday, sending its shares modestly higher.

AT&T said that it earned astir $1.5 billion, oregon 21 cents a share, successful the 2nd quarter. A $4.6 cardinal write-down of the worth of the company’s Latin American concern subtracted 52 cents per stock from profits, portion AT&T says that different charges related to merger amortization and its pension obligations subtracted an further 16 cents. The company’s adjusted net per stock came successful astatine 89 cents, up 7% from a twelvemonth earlier and 10 cents up of the mean estimation among Wall Street analysts.

Revenue was $44 billion, up astir 8% and astir $1.4 cardinal much than analysts had expected. The bulk of that leap successful income came from WarnerMedia, which reported continued maturation astatine HBO Max and a rebound successful advertizing from the pandemic-depressed 2nd 4th past year.

AT&T added astir 1.2 cardinal postpaid wireless subscribers—customers who wage a monthly bill—including 789,000 postpaid phones, a intimately watched metric for wireless companies. The company’s postpaid telephone churn rate, the percent of customers who cancel each month, fell to 0.69%, which AT&T says is its lowest quarterly churn ever. AT&T besides added a nett 297,000 prepaid subscribers past quarter, including 174,000 phones. Both postpaid and prepaid maturation was up of estimates.

AT&T has been assertive successful pricing successful 2021, offering some caller and existing customers deals connected caller phones and different discounts oregon perks. That has been showing up much successful its subscriber numbers than successful its profits. AT&T has present added astir 2.8 cardinal postpaid phones successful the past 4 quarters, rebounding from a diminution aboriginal successful the pandemic past spring. Its wireless revenues were up much than 10% twelvemonth implicit twelvemonth successful the 2nd quarter, but nett margins and mean gross per idiosyncratic shrank.

The different important limb of AT&T’s telecom concern is its broadband net service, which it has been expanding with caller fibre optic cablegram successful much areas. The institution added 246,000 fibre net subscribers past quarter. CFO Pascal Desroches said that maturation successful fibre optic cable-based services outpaced declines successful slower, older technologies past quarter.

Those wireless and wireline businesses volition inactive beryllium portion of AT&T a twelvemonth from now. The institution is successful the midst of a purge of divisions that aren’t related to its halfway mission, raising currency to wage down indebtedness and invest successful telecom infrastructure.

That includes the spinoff of DirecTV outer assets successful a woody with the private- equity steadfast TPG that which absorption said Thursday should adjacent successful the coming weeks. AT&T volition get quarterly dividend payments from DirecTV.

Also successful the pipeline is the spinoff of WarnerMedia, which volition beryllium merged with Discovery (DISCA). A planned dividend cut arsenic portion of the second transaction deed AT&T’s banal earlier this year. AT&T completed the merchantability of its Puerto Rican wireless and wireline operations precocious past year.

AT&T said connected Wednesday evening that it has agreed to merchantability Vrio, its Latin American satellite-TV business, to Argentina’s Grupo Werthein, astatine an endeavor worth of $500 million, according to an AT&T spokesperson. That includes much than 10 cardinal subscribers successful 11 countries. Coinciding with the sale, AT&T has written down the worth of Vrio connected its equilibrium expanse by $4.6 billion, which is simply a noncash accounting charge. 

The instrumentality of sports events and different programming helped boost advertizing revenues by astir 50% twelvemonth implicit twelvemonth astatine WarnerMedia successful the 2nd quarter. HBO Max and HBO had a combined 67.5 cardinal subscribers globally astatine the extremity of the period, up by 3.6 cardinal successful the 3 months. That lifted direct-to-consumer revenues by adjacent to 40% twelvemonth implicit year. Overall WarnerMedia revenues were $8.8 cardinal successful the quarter, up 31%. 

But costs grew faster, with the instrumentality of sports-rights payments and dense contented concern for HBO Max. WarnerMedia’s net earlier interest, taxes, depreciation, and amortization, oregon Ebitda, was astir $1.9 cardinal past quarter, down 10% from a twelvemonth ago. Discovery is scheduled to study its second-quarter results connected Aug. 3.

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AT&T said connected Thursday that it present expects to scope betwixt 70 cardinal and 73 cardinal HBO Max and HBO subscribers by the extremity of this year, up from 67 cardinal to 70 cardinal previously. Management besides lifted their wide gross and nett guidance for 2021. AT&T present expects to summation income by 2% to 3% and boost adjusted net per stock by a percent successful the debased to mid azygous digits. That is up from the 1% gross maturation and “stable” net per stock absorption predicted 3 months ago. 

AT&T besides expects escaped currency travel astir $27 billion—$1 cardinal much than before—and to marque $17 cardinal successful superior expenditures successful 2021. AT&T ended the 2nd 4th with leverage of 3.2 times nett indebtedness to adjusted Ebitda.

Through Wednesday’s close, AT&T banal had returned astir 2% including dividends successful 2021, versus a 17% instrumentality for the S&P 500. T-Mobile US (TMUS) banal had gained 7% this twelvemonth and Verizon had mislaid 2% aft dividends.

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