AT&T charges $ 15.5 billion on DirecTV unit

Executives called the non-cash accounting expense a sign of the pay-TV unit’s obsolescence as the Dallas company promotes an internet streaming model that gives its content production activities a direct line to viewers.

“Our biggest and most important bet is HBO Max,” Chief Executive John Stankey said on Wednesday during a conference call. Executives plan to expand the service’s footprint in other countries this year and launch an ad-supported version in the second quarter.

Overall, AT&T reported a fourth-quarter loss of $ 13.89 billion, or $ 1.95 a share, compared to a profit of $ 2.39 billion, or 33 cents a share, a year earlier. Sales fell 2.4% to $ 45.7 billion.

The coronavirus pandemic has put pressure on the company, putting pressure on revenue from cable networks such as CNN and TBS year-round and closing many of the theaters showing its Warner Bros. movies. That downturn hid recent gains in the company’s wireless service, which still generates more than half of the company’s profits.

The last three months of the year saw AT&T net profit of 800,000 postpaid phone subscribers, a measure closely watched by Wall Street. Rivals Verizon Communications Inc.

and T-Mobile US Inc.

reported net gains of 279,000 and 824,000 from such connections, respectively.

Sales of AT & T’s WarnerMedia division fell 9.5% to $ 8.5 billion as show business continued to struggle with low box office revenues and weak ad revenues. The HBO company grew and ended the year with nearly 42 million subscribers in the US, a figure that includes older cable plans as well as the new online service.

AT & T’s media division stunned Hollywood last year with a plan to destroy all of Warner Bros. ‘2021 movies on HBO Max the same day they hit theaters. Executives said the move would help the company deal with audiences reluctant to attend theaters during a pandemic, while boosting the studio’s sister streaming service.

The online-only HBO Max service closed the year with 17 million activated accounts. It’s less than a year old, but competes in a crowded global streaming video market where Netflix Inc.

has already eclipsed over 200 million subscribers worldwide and Walt Disney Co.

Disney + reached nearly 87 million subscribers in December.

Revenues for AT & T’s traditional video unit, which includes U-verse and DirecTV services, fell 11% in the fourth quarter to $ 7.2 billion. The company ended the year with 17.2 million domestic connections, up from 20.4 million at the end of 2019.

AT&T has entered into deal talks with suitors, including private equity firm TPG, which valued the video business at more than $ 15 billion, including debt. The fourth-quarter write-off reflects how the company has changed since AT&T bought DirecTV in 2015 for $ 49 billion, or $ 66 billion including debt.

The Wall Street Journal reported in August that AT&T had called on bankers to investigate a deal to take the rapidly declining company off the books. The transaction could allow AT&T to deconsolidate DirecTV’s deteriorating financial results while retaining a stake in the TV business.

The video losses weighed on AT & T’s stock, which missed the stock market rally. Stocks of AT&T fell about 20% last year. Shares fell slightly to $ 29.47 Wednesday afternoon.

The company predicted stability for 2021 and forecast adjusted core earnings in line with last year’s earnings of $ 3.18 per share and revenue growth of approximately 1%, with $ 26 billion in free cash flow. The company generated $ 27.5 billion in free cash flow in 2020, a figure that executives are highlighting as a sign of strength.

“The core business is going well,” said John Stephens, AT&T Chief Financial Officer. “That shows everyone the strength of our resilient customer base. Cash is not fictitious, it is real. As such it is a true referee of value. “

AT & T’s board last month declined to raise the quarterly dividend after 36 years of surging payouts. Payments to shareholders will still cost the company about $ 15 billion this year. The company’s recent financial forecast would allow it to continue to pay that amount until 2021.

The company is entering the year with a string of new leaders. His longtime boss, Randall Stephenson, retired as chairman of the board earlier this month after stepping down as CEO in 2020. Mr. Stephens plans to retire later this year.

AT&T is now headed by Mr. Stankey. Pascal Desroches, Chief Financial Officer at WarnerMedia, will take over as Chief Financial Officer later this year. William Kennard, a former director and former chairman of the Federal Communications Commission, took over the chair.

Write to Drew FitzGerald at [email protected]