8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Sep 29, 2015)

Filed September 29, 2015For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) filed an 8-K on September 29, 2015, providing an update on its expected third-quarter 2015 results and reaffirming full-year guidance ahead of an analyst conference. The company anticipates strong performance across its key segments, including significant wireless net adds and positive contributions from the recently acquired DIRECTV business. Despite foreign exchange headwinds impacting international operations, AT&T reiterated its outlook for double-digit revenue growth, adjusted EPS, and consolidated margin expansion. Key financial expectations include free cash flow exceeding $4.5 billion for the quarter, with capital expenditures expected to increase from Q2 levels. The wireless segment is projected to achieve over 2 million total net adds across all customer categories, maintaining strong service EBITDA margins. The integration of DIRECTV is progressing well, with expectations of positive U.S. DIRECTV net adds, while U-verse TV subscribers are anticipated to decline as AT&T shifts focus to satellite and higher-value customers. A change in DIRECTV's commercial subscriber counting methodology was also disclosed, which will reduce reported subscriber numbers but has no impact on financial metrics.

Key Highlights

  • 1AT&T reaffirmed full-year guidance for adjusted EPS and double-digit revenue growth, including expected consolidated margin expansion despite foreign exchange pressures.
  • 2The company anticipates free cash flow to exceed $4.5 billion in Q3 2015, with capital spending rising from Q2 levels.
  • 3More than 2 million total net adds are expected in the wireless segment for Q3, with gains across all customer categories (postpaid, prepaid, connected devices, reseller).
  • 4Integration of DIRECTV is proceeding smoothly, meeting or exceeding expectations, with positive U.S. DIRECTV net adds anticipated.
  • 5U-verse TV subscriber numbers are expected to decrease as AT&T prioritizes satellite and high-value customer segments.
  • 6A change in DIRECTV's commercial subscriber counting method (from revenue-based equivalent to one account per subscriber) will reduce reported subscriber count by 918,600 but will not impact revenue, EBITDA, or cash flow.
  • 7AT&T is on track to cover 40 million POPs with 4G LTE in Mexico by year-end.

Frequently Asked Questions

This 8-K filing provides an update on AT&T's expected third-quarter 2015 financial and operational results and reaffirms its full-year guidance in advance of an upcoming analyst conference. It aims to inform investors about the company's performance and outlook.

The change in how DIRECTV counts commercial subscribers (from an equivalent number of residential subscribers based on revenue to counting each commercial account as one) will reduce the reported DIRECTV subscriber count by 918,600. However, AT&T explicitly states this change has no impact on historical or future revenues, EBITDA, or cash flows, meaning it is a reporting adjustment rather than a financial performance change.

AT&T expects free cash flow to be greater than $4.5 billion for the third quarter. Capital expenditures are projected to increase from second-quarter levels. The company also reiterated its full-year guidance for adjusted EPS and double-digit revenue growth.

For wireless, AT&T anticipates over 2 million total net adds across all customer categories and expects to maintain strong wireless service EBITDA margins. For DIRECTV, integration efforts are going well, and the company expects positive U.S. DIRECTV net adds. However, U-verse TV subscribers are expected to decline as AT&T focuses on other growth areas.