8-KOther EventsExhibits & Filings

AT&T INC. 8-K Report, Corporate Update (Oct 22, 2015)

Filed October 22, 2015For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its third-quarter 2015 results, which were significantly impacted by the recent acquisition of DIRECTV on July 24, 2015. Total revenues surged by 18.6% to $39.1 billion, largely driven by the consolidated DIRECTV operations, which added 32.2 million video subscribers. While net income saw a slight decrease to $3.0 billion ($0.50 per diluted share) from $3.1 billion ($0.60 per diluted share) in the prior year, the company demonstrated strong operational cash flow of $10.8 billion. The integration of DIRECTV is a key strategic move, expanding AT&T's reach in the video services market. The company also highlighted growth in its domestic wireless subscriber base, adding 2.5 million net subscribers, bringing the total to 126.4 million. A notable trend is the increasing adoption of AT&T's "no-device-subsidy" plans, such as Mobile Share Value and AT&T Next, with nearly 60 million domestic wireless connections on Mobile Share Plans and approximately 71% of postpaid smartphone adds and upgrades utilizing AT&T Next. This shift indicates a strategic pivot towards asset-light device sales models and recurring service revenue. The Business Solutions segment showed steady revenue growth and improved operating margins, while Entertainment and Internet Services revenue nearly doubled due to DIRECTV, though the segment's operating margin was impacted by integration costs and programming expenses.

Key Highlights

  • 1Revenue increased 18.6% to $39.1 billion in Q3 2015, primarily due to the DIRECTV acquisition.
  • 2Net income decreased slightly to $3.0 billion ($0.50/share) from $3.1 billion ($0.60/share) in Q3 2014.
  • 3Cash from operating activities was strong at $10.8 billion, up from $8.7 billion year-over-year, boosted by DIRECTV.
  • 4Domestic wireless subscribers grew by 2.5 million to 126.4 million.
  • 5Nearly 60 million domestic wireless connections are on Mobile Share Plans, with ~66% of postpaid smartphone users on no-device-subsidy plans.
  • 6AT&T Next (equipment installment plan) participation increased, with 71% of postpaid smartphone gross adds/upgrades using it.
  • 7Video subscribers significantly increased to 38.0 million post-DIRECTV acquisition, up from 6.1 million a year prior.

Frequently Asked Questions

The acquisition of DIRECTV, completed on July 24, 2015, is the main driver behind the significant 18.6% increase in total revenues to $39.1 billion. It also substantially boosted AT&T's video subscriber base to 38.0 million.

AT&T reported a net gain of 2.5 million domestic wireless subscribers in the third quarter of 2015, bringing the total to 126.4 million. This growth was a mix of connected devices, prepaid subscribers, and postpaid subscribers.

These plans represent a strategic shift for AT&T, moving away from traditional device subsidies towards equipment installment plans (AT&T Next) and shared data plans (Mobile Share Value). The strong adoption, with nearly 60 million connections on Mobile Share Plans and 71% of smartphone upgrades on AT&T Next, indicates a focus on recurring service revenue and a potentially more stable revenue model.

The Entertainment and Internet Services (EIS) segment saw its revenues nearly double to $10.9 billion due to the DIRECTV acquisition. However, operating expenses also rose significantly, and the operating margin was 9.4%, a substantial improvement from the prior year's negative margin but reflecting integration costs and programming expenses.