AT&T Revenue Drops 4.5% and Crisis Impairs Outlook for 2020

(Bloomberg) -- AT&T Inc. posted a 4.5% drop in revenue from a year ago and withdrew its forecast of 2% revenue growth for the year, saying it can’t provide a financial forecast for 2020 due to the coronavirus pandemic.

The Covid-19 crisis hurt earnings by 5 cents a share in the first quarter and knocked $600 million off of revenue due to lower ad sales from canceled sports events like the NCAA men’s basketball tournament. But the U.S. stay-at-home orders, which started in mid-March, did help improve some of AT&T’s slumping consumer businesses.

Homebound customers craving videoconferencing and cellular connections helped boost broadband and wireless numbers. AT&T added a total of 27,000 regular monthly wireless subscribers, exceeding analysts’ prediction for a loss of 132,000. That number includes a loss of tablet customers, offset by 163,000 new mobile-phone customers. And demand for fiber broadband connections surged 34% as more people sought faster home internet access.

AT&T shares rose as much as 3.5% to $30.90 in New York trading Wednesday. The stock was down 24% this year through Tuesday, compared with a 7.5% fall by peer Verizon Communications Inc. and a 15% drop in the S&P 500 Index.

The explosive popularity of Netflix Inc.’s streaming service, especially during the lockdown, continued to hurt AT&T’s pay-TV business. AT&T lost a million more TV subscribers in the first quarter, bringing the loss in the past five quarters to a record 5.1 million. Most of those were satellite-TV cancellations, adding pressure on AT&T to find a buyer or partnership for DirecTV.

AT&T’s efforts to transform itself into a modern media powerhouse hinge on the $15-a-month HBO Max streaming platform, which the phone giant plans to launch on May 27. The service is a late and expensive entry in the crowded online-video arena, following product debuts by Walt Disney Co. and Comcast Corp. AT&T Chief Executive Officer Randall Stephenson has said HBO Max will have 50 million subscribers in five years.

Meanwhile, even though AT&T saw some cost savings in its media division due to idled movie and entertainment production, total WarnerMedia revenue declined 12% to $7.4 billion.

Earnings, excluding certain items, were 84 cents a share on $42.8 billion in sales, according to the statement. Analysts predicted 84 cents on $44 billion, according to an average of more than 18 estimates compiled by Bloomberg.

Cash from operating activities fell to $8.9 billion from $11.1 billion a year ago. Capital spending edged down to $5 billion from $5.2 billion a year ago. AT&T is facing a costly 5G wireless upgrade and a $14 billion dividend payment, and it’s in a spending battle with other media giants to create compelling new shows -- all while a health crisis wallops the nation’s economy.

©2020 Bloomberg L.P.