As AT&T focuses on show business, wireless still struggles – CNET

Sarah Tew

AT&T can’t stop reminding people that it’s in the entertainment business now. 

But the reality is the company’s still in the phone business.

The nation’s second-largest wireless provider by subscribers added 3 million net customers in the third quarter, with 2.3 million in the US, the company said during its earnings report Tuesday. But AT&T gained only 130,000 phone subscribers, and lost 97,000 post-paid phone customers, or people who pay at the end of the month and typically boast higher credit scores and more-expensive bills. It also added 227,000 prepaid phone customers through its Cricket and AT&T Prepaid services, and saw 700,000 new customers from Mexico.

On the other end, AT&T said it added a net 300,000 customers to its DirecTV Now streaming service, a rare bright spot in a period in which the company lost nearly 90,000 US video subscribers. It ended the period with 25.1 million total video subscribers. 

The dichotomy underscores the awkward transition AT&T faces as it looks to transform itself from a stodgy telecom player to a Hollywood powerhouse. Though it doesn’t want to lose you as a phone customer, the company is increasingly seeing more value in delivering you video service, as well as programs like “Game of Thrones.” That’s why it spent $49 billion for satellite TV provider DirecTV and is pushing to close its $85.4 billion acquisition of Time Warner, the studio behind the hit HBO show. 

The extra incentive is that AT&T has been struggling to deal with the competitive heat on the wireless end. In the same quarter, T-Mobile added 595,000 postpaid phone customers, while Verizon gained 274,000. T-Mobile and Sprint are widely expected to announce a merger in the coming weeks, which could potentially create a stronger rival. 

One bright spot: Customers are sticking around longer. AT&T reported that its postpaid customer turnover rate fell to 0.84 percent from 1.04 percent a year ago, even if it ticked up slightly from the second-quarter turnover rate (known in the industry as “churn”) of 0.79 percent. 

On the entertainment side, AT&T crowed about nabbing nearly 800,000 DirecTV Now subscribers in less than a year. But the company also lost 385,000 traditional video subscribers in the period, thanks to competition from both streaming services and other traditional pay-TV providers. It also blamed the company tightening its credit policy and kicking off customers who weren’t paying. 

Of those total losses, 251,000 were satellite TV subscribers from DirecTV. The company saw a net gain of 125,000 broadband customers. 

AT&T posted a third-quarter profit of $3.12 billion, or 49 cents a share. Excluding one-time items, the company earned 74 cents a share. 

Revenue fell 2 percent to $39.67 billion. 

Analysts, on average, expected AT&T to earn 75 cents a share on revenue of $40.12 billion, according to Yahoo Finance

AT&T shares fell 1.7 percent to $34.28 in after-hours trading. 

Corrected at 2 p.m. PT: To note that AT&T lost post-paid customers in the period. 

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