AT&T Inc. lost more television and wireless subscribers than expected last quarter as the phone giant retreated from promotions while working to reduce debt from its takeover of Time Warner.
The Dallas telecom company said Wednesday that its number of TV subscribers shrank by 627,000 in the first quarter. Wireless subscribers shrank by 204,000, mainly because of a drop-off in tablets. Analysts had predicted losses of 389,000 and 50,000, respectively.
AT&T reported first-quarter earnings of $4.1 billion, or 56 cents a share. That matched analyst expectations. Its revenue of $44.83 billion fell short of estimates.
AT&T is, for now, sacrificing subscribers to manage its balance sheet, a strategy that has risks because monthly phone and TV customers generate cash flow that supports dividends and buybacks in the long term.
The company spent $85 billion on Time Warner last year, gaining must-see content as more customers ditch conventional pay TV for streaming alternatives such as subscriptions to Netflix Inc.
But before AT&T invests in its media assets, it is focusing on the debt. At the end of the quarter, net debt stood at $169 billion, down from $180 billion when the deal closed. AT&T said Wednesday that it reduced net debt by $2.3 billion in the first quarter. It is selling assets such as a Hulu investment and office properties including 30 Hudson Yards in New York to help pay down liabilities.
Only 3.5% of AT&T customers upgraded their phones last quarter, the lowest replacement rate ever for the company. Verizon hit a similar low Tuesday as U.S. wireless customers hang on to their phones longer than ever.
AT&T shares slid 4.1% on Wednesday. They have declined 12% in the last year, while the benchmark Standard & Poor’s 500 index has gained 11.1%.