AT&T Is Struggling Under Pressure From Satellite TV and COVID-19

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The company’s shrinking traditional-TV business shows why AT&T needs its new online service to succeed.

According to The Wall Street Journal, AT&T Inc.’s “second-quarter profit fell as the coronavirus pandemic and an already unhealthy satellite-TV business overshadowed the launch of its make-or-break streaming video service.”

AT&T reported about 36 million subscribers on HBO and HBO Max, “an enlarged streaming video service built around the company’s premium TV brand,” wrote The Journal. The telecom and media giant “launched the new Max service in May, when a worsening coronavirus pandemic had already forced millions of U.S. viewers to hunker down at home and look for new shows to watch.”

The Journal wrote that “AT&T said it succeeded in steering most of its existing HBO subscribers to the new HBO Max app, partly with the help of its cable-TV partners. But the company remained at an impasse with Amazon.com Inc. and Roku Inc., two services that resell HBO, over advertising revenue sharing and other issues.”

“AT&T’s shrinking traditional-TV business showed why the company needs its new online service to succeed. The division holding its DirecTV satellite unit lost 886,000 U.S. premium-TV subscribers and 68,000 online-only channel bundles. Its home broadband unit, which includes all but the slowest digital subscriber lines, posted a net loss of 102,000 subscribers,” reported The Journal.

John Stankey, who replaced Randall Stephenson as chief executive, said the $12.1 billion of cash from AT&T’s operations in the quarter is helping to support investments, dividend payments and debt retirement. “We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” he said.

The company said “its annual dividend payout ratio—its total dividends divided by free cash flow—will end 2020 in the lower-60s range after falling to 49% in the second quarter,” added The Journal.

Read the full report here.

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