AT&T Warns Investors of Heavy Q3 DirecTV Subscriber Losses

Lloyd Doyle
October 12, 2017

AT&T Inc's (N:) third-quarter video losses sent pay-TV industry shares down on Thursday after Wall Street analysts raised concerns about the continued threat of consumers cancelling their cable and satellite television subscriptions.

Commenting on an 8-K form - a current report USA companies must file with the country's stock exchange to announce major events that shareholders should know about - filed after close of business on 11 October, analyst MoffettNathanson has sounded the alarm on what is a significant trend in the company's video business.

AT&T's 8-K filing states: "The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards".

"Linear video erosion is worsening, with better (streaming) growth the silver lining", wrote Deutsche Bank (DE:) analyst Matthew Niknam in a research note, adding that the loss was wider than his estimate of 266,000 and far more than last year's subscriber loss of 3,000. In a third-quarter media industry forecast released today, Doug Mitchelson of UBS said he expects pay-TV subscriptions overall to decline 0.9% in the quarter compared with the same period previous year, even with the first and second quarters. The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other. "But we doubt anyone expected them to be this bad". Sure, the weaker the numbers get, the easier it would likely be to gain regulatory approval. The decline of traditional video subscribers negatively hit Entertainment Group revenues and margins, which means the adjusted operating profit margin will be essentially flat year-on-year.

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