Why ATT Has Lost 5 Million Satellite, Streaming and TV Customers in 3 Years

ATT thought that the end of net neutrality - of which it was a major proponent - would enable it to end discounts and raise prices. All it has done is cause customers to cancel their subscriptions and go elsewhere.

Given how poorly its recent strategic acquisitions have gone, it has promised investors it wont be making any more. JL


Jon Brodkin reports in ars technica:

AT&T has lost 5 million satellite-and-wireline TV customers since the end of 2016. AT&T has lost 700,000 streaming customers over the past year. AT&T attributed its premium-TV customer losses to a focus on profitability. Its customer loss in online streaming was (also) caused by "higher prices and less promotional activity," as AT&T phased out discounts.AT&T is facing a class-action lawsuit alleging that it lied to investors in order to hide the failure of its DirecTV Now streaming TV service.
AT&T lost more than 1.3 million TV customers in Q3 2019 as its nosedive in both the traditional pay-TV and online-streaming markets continued.
AT&T today reported a net loss of 1,163,000 customers in the premium TV category, which includes DirecTV satellite and U-verse wireline TV services. That number is slightly worse than the customer loss that AT&T warned investors was coming last month. AT&T today also reported a net loss of 195,000 customers of AT&T TV Now, the online streaming video service formerly known as DirecTV Now.
The latest losses leave AT&T with 20.4 million satellite-and-wireline TV subscribers and 1.1 million streaming subscribers. AT&T has lost nearly 5 million satellite-and-wireline TV customers since the end of 2016, when it had a total of 25.3 million subscribers in that category. AT&T has lost more than 700,000 streaming customers over the past year since hitting a peak of 1.86 million in Q3 2018.
AT&T's quarterly Video Entertainment revenue fell from $8.3 billion to $7.9 billion year over year. AT&T has focused on increasing the average revenue per customer, which rose 5.6% to $121.35 per month in the satellite-and-wireline TV category. The overall Entertainment Group—including TV, broadband, and landline phone services—had Q3 revenue of $11.2 billion, down from $11.6 billion in Q3 2018. But the division turned an operating profit of $1.1 billion, only about $19 million less than the previous year's third quarter.AT&T attributed its premium-TV customer losses to a focus on profitability. "Customers rolling off promotional discounts, programmer disputes and competition as well as lower gross adds due to the continued focus on adding higher-value customers" all contributed to the net loss of 1,163,000 customers in that category, AT&T said.
AT&T said its 195,000-customer loss in online streaming was caused by "higher prices and less promotional activity," as AT&T phased out discounts that it previously used to boost subscriber numbers. AT&T has raised TV prices several times despite claiming that its 2018 acquisition of Time Warner Inc. would allow it to lower TV prices.AT&T's company-wide revenue, including its mobile network, was $44.6 billion in Q3, down from $45.7 billion a year ago. Operating income rose from $7.3 billion to $7.9 billion. "Declines in revenues from legacy wireline services, WarnerMedia and domestic video, were partially offset by growth in strategic and managed business services, domestic wireless services and IP broadband," AT&T said.

AT&T promises no more big mergers

AT&T has been under pressure from activist investor group Elliott Management Corp., which has criticized AT&T's TV strategy and urged the company to consider divesting DirecTV.
AT&T today reached a deal with Elliott that does not involve selling DirecTV. However, AT&T promised to conduct a "disciplined review" of its portfolio and said it will make "no major acquisitions" over the next three years.
"We have closely evaluated the company's three-year plan and support the steps toward a faster-growing, more profitable, focused and shareholder-friendly company," Elliott said in an announcement. Elliott said the deal includes "significantly enhanced operational efficiency with meaningful margin expansion" and the appointment of two new directors.
AT&T said that CEO Randall Stephenson, who is nearing retirement, will continue in the top role through all of 2020. After the expected CEO transition, the roles of CEO and chairman will be separated instead of being held by the same person, Elliott said.
As The Wall Street Journal noted, the plan also "calls for AT&T to spend 50 percent to 70 percent of its free cash flow after dividend payments on share buybacks." Despite AT&T making concessions, Elliott "has no restrictions on its ability to publicly criticize the company in the future," the Journal wrote.
AT&T has $153.6 billion in long-term debt, largely from its purchases of DirecTV and Time Warner. Over the next three years, AT&T said it will pay off all of the Time Warner debt and reduce its net debt-to-adjusted EBITDA ratio from its current level of 2.66X to somewhere between 2X and 2.25X.
AT&T is facing a class-action lawsuit alleging that it lied to investors in order to hide the failure of its DirecTV Now streaming TV service. The lawsuit was recently updated to include allegations that AT&T supervisors encouraged sales reps to create fake DirecTV Now accounts and sign AT&T customers up for DirecTV Now "without the customer knowing."
Stephenson said in an earnings call today that AT&T expects its planned HBO Max service to get 50 million US subscribers within five years, Deadline reported. That sounds optimistic, given that the existing HBO Now service reportedly had 8 million subscribers at the end of 2018. HBO Max is expected to cost about the same amount as HBO Now, which is $15 per month, so the average revenue per customer will be much lower than DirecTV and AT&T TV Now.