AT&T Takes a Hit

AT&T took a major charge in its fourth quarter on its pay-TV business reflecting the changing desires of consumer trends.

AT&T took a $15.5 billion non-cash charge related to its move to split its video business from broadband and legacy telephony operations within the company.

The fourth quarter loss for the company comes at a time when it is weighing the potential sale of its pay-TV assets to better focus its investments on newer technologies. The major charge reflects the trend among consumers away from cable services and towards streaming platforms.

AT&T’s streaming service HBO Max continues to perform extremely well for the company and has experienced significant growth. Executives for the company plan to expand the streaming service’s reach in other countries later this year and launch an advertising-supported version of HBO Max in the second quarter.

“Our biggest and most important bet is HBO Max,” said Chief Executive John Stankey on a conference call Jan. 27.

HBO Max was aided by the release of Wonder Women 1984, which helped the service double activations to 17.2 million in the fourth quarter of 2020. By the end of 2020, HBO Max and HBO U.S. had 41.5 million combined subscribers, an increase of 20% from 34.6 million subscribers a year prior.

Overall the company showed better than expected numbers for its fourth quarter revenues and earnings, despite losses. The company reported its adjusted earnings for the three months ending in December were 75 cents a share compared to the 89 cents a share the year prior. This number exceeded the expected 73 cents.

The write-down was the primary cause of loss experienced by the company, resulting in a fourth quarter loss of $13.89 billion, the equivalent of $1.95 a share, compared with a profit of $2.39 billion, or 33 cents a share, for the year prior.

Revenue for the company also slipped down 2.4% to $45.69 billion, a decrease from $44.58 billion a year ago.

Much of the pressure on the company’s finances comes from the coronavirus pandemic. The Warner Brothers Films section of the company took a hit when theaters were shut down and the company could no longer show its films. The media division’s revenue fell 9.5% to $8.5 billion.

The impact of theater shut-downs obscured gains made in other sections of the company. In the last three months of 2020 AT&T reported a net gain of 800,000 postpaid phone subscribers, an important metric for Wall Street analysts. Rival telecom companies Verizon Communications Inc. and T-Mobile US Inc. reported net gains of 279,000 and 824,000, respectively.

2020 has been a tough year for many companies but AT&T has continued to fight its way through the pandemic. The company generated $27.5 billion of free cash flow in 2020, a figure that executives for the company highlighted as a sign of strength.

“The business core is going well. That shows everybody the power of our resilient customer base. Cash isn’t fictitious, it’s real. As such, it’s a real arbiter of value,” AT&T finance chief John Stephens said

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