8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Jan 20, 2017)

Filed January 20, 2017For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) filed an 8-K on January 20, 2017, disclosing key financial and operational updates for the fourth quarter of 2016. The company expects to record a significant noncash, pre-tax loss of approximately $1.0 billion due to the annual remeasurement of its pension and postemployment benefit plans. This loss primarily stems from a decrease in assumed discount rates, but it was substantially offset by various gains, including better claims experience and asset returns. Importantly, this noncash charge will not impact segment operating results or margins and will be treated as an adjusting item in their Q4 results. Operationally, AT&T anticipates strong subscriber growth. Key drivers include over 900,000 domestic wireless net adds (split between postpaid and prepaid), more than 1.2 million wireless net adds in Mexico, and over 200,000 video net adds, predominantly from the new DIRECTV NOW service. The company also noted the ongoing impact of 2G deactivations, with a substantial reduction in 2G subscribers, signifying a transition towards newer network technologies.

Key Highlights

  • 1AT&T expects a noncash, pre-tax loss of approximately $1.0 billion for Q4 2016 related to pension and postemployment benefit plan remeasurement.
  • 2The pension loss is primarily due to a decrease in assumed discount rates but is largely offset by other gains.
  • 3The noncash pension loss will not affect segment operating results or margins.
  • 4Anticipates over 900,000 branded domestic wireless net adds in Q4 2016 (approx. 500,000 postpaid, 400,000 prepaid).
  • 5Expects over 1.2 million wireless net adds in Mexico for Q4 2016.
  • 6Reports over 200,000 video net adds in Q4 2016, driven by DIRECTV NOW.
  • 7Significant progress in 2G deactivations, with approximately 700,000 2G deactivations in Q4 2016, leaving about 2.3 million 2G subscribers remaining.

Frequently Asked Questions

AT&T expects to record a noncash, pre-tax loss of approximately $1.0 billion for the fourth quarter of 2016 due to the annual remeasurement of its pension and postemployment benefit plans. However, this is a noncash item and will not affect segment operating results or margins, and will be treated as an adjusting item in their reported results.

Subscriber growth is expected to be driven by strong performance in both domestic wireless (over 900,000 net adds, including both postpaid and prepaid), significant expansion in Mexico (over 1.2 million wireless net adds), and the successful launch of DIRECTV NOW contributing over 200,000 video net adds.

The ongoing 2G deactivations, with approximately 700,000 in the fourth quarter, indicate AT&T's strategic shift towards modernizing its network infrastructure and focusing on newer technologies like 4G and 5G. This move is expected to streamline operations and improve network efficiency.

The pension loss is a noncash accounting charge and does not represent an outflow of cash. Therefore, it should not directly impact AT&T's cash flow available for dividends or business investments.