AT&T subscriber losses highlight cord-cutting threat
AT&T Inc’s third-quarter video losses sent pay-TV industry shares down last week after Wall Street analysts raised concerns about the continued threat of consumers cancelling their cable and satellite television subscriptions. The number 2 US wireless carrier, which owns satellite television service DirecTV, said in a filing that it lost 90,000 US video subscribers in the quarter due to intense competition in traditional pay TV markets and the impact of the recent hurricanes. Shares were down 3.8 per cent to $36.74.
“It should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting,” said Craig Moffett, analyst at MoffettNathanson, in an e-mail. “It is reasonable to expect a weak quarter for the whole pay-TV industry.”
The announcement weighed on other stocks in the sector, with shares of Dish Network Corp, Charter Communications Inc, Comcast Corp and Altice USA Inc trading lower.
AT&T said it added roughly 300,000 subscribers to DirecTV Now, its cheaper option for customers who want to stream television over the Internet.
That means the company lost 390,000 subscribers to its satellite and U-verse services, who are considered to be higher-value customers.
“Linear video erosion is worsening, with better (streaming) growth the silver lining,” wrote Deutsche Bank analyst Matthew Niknam in a research note, adding that the loss was wider than his estimate of 266,000 and far more than last year’s subscriber loss of 3,000.
AT&T said in its filing that the decline of traditional video subscribers will negatively impact its entertainment group revenue and margins. The company is expected to report earnings on October 24. AT&T is not the only pay-TV provider to point to a more competitive environment. Cable company Comcast Corp said in September it expected to lose up to 150,000 video subscribers in the third quarter, citing the same reasons.
The losses come after more options have entered the market that allow consumers to stream television over the Internet at a cheaper price than paying for cable. Deutsche Bank’s Niknam noted accelerating competition from Dish’s Sling service, Sony Corp’s PlayStation Vue and others.