8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Oct 11, 2017)

Filed October 11, 2017For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) filed an 8-K on October 11, 2017, to provide an update on its third-quarter 2017 financial performance. The company reaffirmed its full-year guidance across key metrics, including adjusted earnings growth, operating margin expansion, capital expenditures, and free cash flow. However, AT&T highlighted the significant impact of natural disasters, specifically hurricanes and earthquakes, which are expected to reduce third-quarter revenues by approximately $90 million and pre-tax earnings by about $0.02 per diluted share. Further impacts are anticipated in the fourth quarter as restoration efforts continue. Key operational highlights for the third quarter include strong growth in DIRECTV NOW net adds, reaching nearly 300,000, although total U.S. video subscribers are projected to decline by about 90,000 due to competition, natural disasters, and stricter credit standards. The company also experienced fewer handset equipment upgrades, impacting wireless equipment revenue, but maintained low postpaid phone churn. Additionally, AT&T adjusted its reporting for prepaid Internet of Things (IoT) connections, leading to a classification change in subscriber numbers.

Key Highlights

  • 1AT&T reaffirms its full-year 2017 financial guidance for adjusted earnings growth, operating margin expansion, capital expenditures, and free cash flow.
  • 2Natural disasters (hurricanes, earthquakes) are estimated to reduce Q3 2017 revenue by ~$90 million and pre-tax earnings by ~$0.02 per diluted share.
  • 3DIRECTV NOW saw strong net adds of nearly 300,000 in Q3 2017.
  • 4Total U.S. video subscribers are expected to decrease by approximately 90,000 in Q3 2017, driven by competition and natural disasters.
  • 5Wireless equipment revenue will be adversely impacted by nearly 900,000 fewer handset equipment upgrades compared to the prior year's Q3.
  • 6Postpaid phone churn remains at low levels, and gross adds are unaffected by the upgrade trend.
  • 7A reclassification of prepaid IoT connections impacts subscriber count reporting, adding 97,000 net adds to the prepaid category.

Frequently Asked Questions

The primary reason is to inform investors about the significant impact of natural disasters, specifically hurricanes and earthquakes, on AT&T's third-quarter 2017 results, and to provide an update on key operational metrics.

The natural disasters are expected to reduce reported third-quarter consolidated revenues by approximately $90 million and reported pre-tax earnings by about $0.02 per diluted share. Further impacts are anticipated in the fourth quarter as service restoration continues.

While DIRECTV NOW is experiencing strong net additions (nearly 300,000), the overall U.S. video subscriber base is projected to decline by about 90,000 in the third quarter. This decline is attributed to competition in traditional pay TV, over-the-top services, hurricane impacts, and stricter credit standards.

Yes, effective July 1, 2017, AT&T is reporting prepaid Internet of Things (IoT) connections as a separate category. This reclassification results in an increase of 97,000 prepaid net adds for the quarter and a corresponding decrease in connected device net adds.