AT&T US up 80k; DTVLA up 140k video subs in 2Q 2018

AT&T Completes Time Warner Acquisition; Agrees to Acquire AppNexus; Reports Second-Quarter Results

DALLAS — AT&T Inc. reported solid wireless results in the second quarter, including postpaid phone gains, continued strong prepaid phone growth and stable postpaid churn. On a GAAP basis, service revenue declined; however, on a comparable basis service revenue grew. Including the acquisition of Time Warner in mid-June, AT&T reported consolidated revenue growth on a comparable basis, which offset pressure from its entertainment and business segments, and strong earnings and free cash flow growth.

Entertainment Group

Total revenues were $11.7 billion, down 8.0% versus the year-earlier quarter due to the impact of ASC 606 revenue recognition and declines in linear TV subscribers and legacy services. On a comparative basis, excluding the impact of revenue recognition, revenues were down 6.4%.

Total video subscribers grew by 80,000 in the quarter as DIRECTV NOW subscribers more than offset linear video declines. The Entertainment Group ended the quarter with 25.4 million total video subscribers.

• Linear video subscribers declined 262,000 in the second quarter due to heightened competition in linear pay-TV markets and from over-the-top services. Satellite subscribers declined by 286,000 in the quarter, and IPTV subscribers increased by 24,000.
• DIRECTV NOW added 342,000 subscribers to reach 1.8 million. During the quarter, the company launched a new video platform with enhanced capabilities including cloud DVR.
• On June 28, the company launched its newest video offering, AT&T WatchTV. The service is included at no cost with AT&T Unlimited &More and AT&T Unlimited &More Premium wireless service plans or as a $15-a-month stand-alone service.

Video (in thousands)

                                                                                     Three Months Ended
               ----------------------------------------------------------------------------------------
                6/30/16   9/30/16  12/31/16   3/31/17   6/30/17   9/30/17  12/31/17   3/31/18   6/30/18
               --------  --------  --------  --------  --------  --------  --------  --------  --------
Connections
 Satellite       20,454    20,777    21,012    21,012    20,856    20,605    20,458    20,270    19,984
 U-verse          4,841     4,515     4,253     4,020     3,825     3,691     3,631     3,632     3,656
 DIRECTV NOW          -         -       267       339       491       787     1,155     1,467     1,809
               --------  --------  --------  --------  --------  --------  --------  --------  --------
Total            25,295    25,292    25,532    25,371    25,172    25,083    25,244    25,369    25,449
                                    
Net Adds                  
 Satellite          342       323       235         0      -156      -251      -147      -188      -286
 U-verse           -391      -326      -262      -233      -195      -134       -60         1        24
 DIRECTV NOW          -         -       267        72       152       296       368       312       342
               --------  --------  --------  --------  --------  --------  --------  --------  --------
Total               -49        -3       240      -161      -199       -89       161       125        80

International – DIRECTV Latin America

DIRECTV Latin America revenues reflect price increases driven by macroeconomic conditions with generally depreciating local currencies. Total revenues from Latin America were $1.3 billion, down 7.9% year over year due primarily to foreign exchange pressures. Operating income was $52 million with continued positive free cash flow year to date.

• Second-quarter subscriber net adds were 140,000 even with declines in Brazil. Total subscribers at the end of the quarter were 13.7 million. Sky Mexico had approximately 8.0 million subscribers as of June 30, 2018.

Video (in thousands)

                                                                                     Three Months Ended
               ----------------------------------------------------------------------------------------
                6/30/16   9/30/16  12/31/16   3/31/17   6/30/17   9/30/17  12/31/17   3/31/18   6/30/18
               --------  --------  --------  --------  --------  --------  --------  --------  --------
Connections      12,523    12,476    12,455    13,678    13,622    13,490    13,629    13,573    13,713
Net Adds            87       -48       -21        91       -56      -132       139       -15        140