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AT&T INC. 8-K Report, Corporate Update (Oct 24, 2018)

Filed October 24, 2018For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its third-quarter 2018 results, marking a significant period following the acquisition of Time Warner. The company's net income surged to $4.7 billion, or $0.65 per diluted share, a substantial increase from $3.0 billion, or $0.49 per diluted share, in the prior year's quarter. This improvement was driven by the consolidation of Time Warner's operations, favorable impacts from U.S. corporate tax reform, and the adoption of new revenue accounting rules. Total revenues also saw a healthy rise of 15.3% to $45.7 billion, largely attributable to the Time Warner acquisition and increased equipment sales, though partially offset by declines in video and legacy services and the impact of new accounting standards. The company added a significant 4.3 million net wireless subscribers in North America, reaching a total of 167.6 million. While this growth was boosted by connected devices (including wholesale connected cars), postpaid phone net adds saw a slight decline. The video subscriber base experienced a net decrease of 369,000, primarily due to pressures on linear video subscribers, despite growth in the DIRECTV NOW over-the-top service. Broadband connections remained stable, with a net loss of 25,000 subscribers.

Key Highlights

  • 1Net income rose significantly to $4.7 billion ($0.65/share) in Q3 2018, up from $3.0 billion ($0.49/share) in Q3 2017, boosted by Time Warner acquisition, tax reform, and new accounting rules.
  • 2Total revenues increased by 15.3% year-over-year to $45.7 billion, driven by Time Warner's contribution and higher equipment sales.
  • 3North American wireless subscribers grew by a net 4.3 million, bringing the total customer base to 167.6 million, with connected devices being a major growth driver.
  • 4Postpaid phone subscriber net adds experienced a slight loss of 159,000 in North America.
  • 5Video subscribers declined by a net 369,000, impacted by traditional video subscriber losses, although DIRECTV NOW saw some growth.
  • 6The company reorganized its operating segments to include Communications, WarnerMedia, Latin America, and Xandr following the Time Warner acquisition.
  • 7Xandr, the advertising segment, showed strong revenue growth of 33.6%, primarily due to the acquisition of AppNexus.

Frequently Asked Questions

The primary drivers for the significant increase in net income were the acquisition of Time Warner, which began contributing to results, favorable impacts from U.S. corporate tax reform, and the adoption of new revenue accounting rules (ASC 606).

The acquisition of Time Warner significantly boosted AT&T's total revenues, contributing substantially to the WarnerMedia segment, which is a new reportable segment. This acquisition also led to a revised operating segment structure including Communications, WarnerMedia, Latin America, and Xandr.

AT&T's total video subscribers decreased by a net of 369,000 in Q3 2018. This decline is attributed to continued pressure on traditional linear video subscribers, although the over-the-top (OTT) service, DIRECTV NOW, showed some growth, with a portion of its subscribers on free trials.

AT&T added a strong 4.3 million net wireless subscribers in North America. However, while connected devices (especially wholesale connected cars) drove significant additions, postpaid phone subscriber net adds saw a slight loss.