AT&T Books $ 15.5 billion in charges on DirecTV unit

The executives considered charging non-monetary accounting to be a sign of the aging of the pay-TV unit, as the Dallas company promotes an Internet streaming model that gives its content production business a direct line to viewers.

“Our biggest and most important bet is HBO Max,” Chief Executive John Stankey said in a conference call on Wednesday. The executives plan to expand the service’s presence in other countries this year and launch an advertising-supported version in the second quarter.

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

The coronavirus pandemic has affected the company, putting pressure on cable networks like CNN and TBS over the year and closing many of the cinemas showing their Warner Bros. films. These setbacks have obscured recent gains in the company’s wireless service, which still generates more than half of the company’s profit.

The last three months of the year provided AT&T with a net gain of 800,000 postpaid phone subscribers, a metric closely observed by Wall Street. Verizon Communications rivals Inc.

and T-Mobile US Inc.

reported net gains of 279,000 and 824,000 from these connections, respectively.

Revenue from AT&T’s WarnerMedia division fell 9.5% to $ 8.5 billion as the show business side continued to struggle with low box office revenue and weak advertising revenue. HBO’s business grew and ended the year reaching 42 million subscribers in the United States, a number that includes older cable plans, as well as the new online service.

AT&T’s media division surprised Hollywood last year with a plan to launch all Warner Bros. ‘2021 films on HBO Max the same day they hit theaters. Executives said the move would help the company deal with audiences reluctant to visit cinemas during a pandemic, while giving the studio’s sister streaming service an extra boost.

The HBO Max online only service ended the year with 17 million accounts activated. It’s not yet a year old, but it is competing in a crowded global video streaming market, where Netflix Inc.

already eclipsed more than 200 million subscribers worldwide and Walt Disney Co.

Disney + reached almost 87 million subscribers in December.

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

AT&T held negotiations with suitors, including private equity firm TPG, which valued the video business at more than $ 15 billion, including debt. The fall in value in the fourth quarter reflects how the business has changed since AT&T bought DirecTV in 2015 for $ 49 billion, or $ 66 billion including debt.

The Wall Street Journal reported in August that AT&T had called on bankers to explore an agreement to take the business out of its books’ rapid retraction. The transaction could allow AT&T to deconsolidate DirecTV’s worst financial results, while retaining a stake in the TV company.

Video losses weighed on AT&T’s stock, which failed to recover the stock market. AT&T’s shares fell about 20% last year. The shares fell slightly to $ 29.47 at noon on Wednesday.

The company projected stability for 2021, forecasting central adjusted earnings in line with last year’s $ 3.18 per share result and revenue growth of around 1%, with $ 26 billion of free cash flow. The company generated $ 27.5 billion of free cash flow in 2020, a number that executives highlighted as a sign of strength.

“The core business is doing well,” said John Stephens, chief financial officer at AT&T. “This shows everyone the power of our resilient customer base. Money is not fictitious, it is real. As such, he is a true arbiter of value. “

AT&T’s board last month refused to increase the quarterly dividend after 36 years of increasing payments. Payments to shareholders will still cost the company about $ 15 billion this year. The company’s recent financial forecast would allow it to continue paying that amount until 2021.

The company enters the year with a list of new leaders. His longtime boss, Randall Stephenson, retired as chairman of the board earlier this month, after stepping down as CEO in 2020. Stephens plans to retire later this year.

AT&T is now led by Mr. Stankey. WarnerMedia’s chief financial officer, Pascal Desroches, is expected to take over as chief financial officer later this year. William Kennard, longtime director and former president of the Federal Communications Commission, took over the presidency.

Write to Drew FitzGerald at [email protected]