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AT&T Books $15.5 Billion Charge on DirecTV Unit--Update

01/27/2021 | 08:07am EDT

By Drew FitzGerald

AT&T Inc. booked a $15.5 billion charge on its pay-TV business, reflecting the damage cord-cutting has taken on its DirecTV satellite unit even as the company's HBO Max streaming service's growth ramped up.

The write-down created a fourth-quarter loss as the media and telecom giant signaled it would move away from traditional channel bundles to focus on streaming media. The company reported quarterly revenue declines in its pay-TV and WarnerMedia units, offsetting gains in its core wireless phone division.

Overall, AT&T reported a fourth-quarter loss of $13.89 billion, or $1.95 a share, compared with a profit of $2.39 billion, or 33 cents a share, a year earlier. Revenue fell 2.4% to $45.7 billion.

The coronavirus pandemic has strained the giant, hurting advertising at cable networks like CNN and TBS and closing many of the theaters that show its Warner Bros. films. Those pullbacks obscured gains in the company's wireless service, which still generates more than half of the company's profits.

The last three months of the year gave AT&T a net gain of 800,000 postpaid phone subscribers, a metric closely watched by Wall Street. Rivals Verizon Communications Inc. and T-Mobile US Inc. reported net gains of 279,000 and 824,000 such connections, respectively.

Revenue from AT&T's WarnerMedia division fell 9.5% to $8.5 billion as the show business side continued to wrestle with low box-office revenue and weak advertising revenue. The HBO business grew and ended the year with 41.5 million U.S. subscribers, a figure that includes older cable plans as well as the new online service.

AT&T's media division stunned Hollywood last year with a plan to release all of Warner Bros.' 2021 movies on HBO Max the same day they hit theaters. Executives said the move would help the business cope with audiences reluctant to visit theaters during a pandemic while giving the studio's sister streaming service an extra boost.

HBO Max ended the year with 17.1 million activated accounts. It is competing in a crowded streaming-video marketplace where Netflix Inc. has already eclipsed more than 200 million subscribers world-wide.

Revenue in the video unit, which includes AT&T's U-verse and DirecTV services, fell 11% to $7.2 billion in the fourth quarter. The business ended the year with 17.2 million domestic connections, down from 20.4 million at the end of 2019.

AT&T has held deal discussions with suitors, including private-equity firm TPG, that valued the video business at more than $15 billion including debt, the Journal has reported. The fourth-quarter write-down reflects how the business has changed since AT&T bought DirecTV in 2015 for $49 billion.

The Wall Street Journal reported in August that AT&T had tapped bankers to explore a deal to take the fast-shrinking business off its books. The transaction could allow AT&T to deconsolidate DirecTV's worsening financial results while retaining a stake in the TV giant.

The video losses have weighed on AT&T's stock, which missed out the stock market's rally. AT&T shares fell about 20% last year.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

01-27-21 0807ET

Stocks mentioned in the article
ChangeLast1st jan.
AT&T INC. 0.31% 25.7 Delayed Quote.-10.64%
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VERIZON COMMUNICATIONS 0.67% 52.27 Delayed Quote.-11.63%
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Sales 2021 168 B - -
Net income 2021 17 627 M - -
Net Debt 2021 157 B - -
P/E ratio 2021 10,6x
Yield 2021 8,12%
Capitalization 183 B 183 B -
EV / Sales 2021 2,02x
EV / Sales 2022 2,14x
Nbr of Employees 230 760
Free-Float 93,6%
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Technical analysis trends AT&T INC.
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Income Statement Evolution
Mean consensus HOLD
Number of Analysts 28
Last Close Price 25,70 $
Average target price 32,11 $
Spread / Average Target 24,9%
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John T. Stankey President, CEO, COO & Director
Pascal Desroches Chief Financial Officer & Senior Executive VP
William E. Kennard Independent Chairman
David S. Huntley Chief Compliance Officer & Senior Executive VP
Matthew K. Rose Lead Independent Director
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