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 outbreak.
The COVID-19 crisis hurt earnings by 5 cents a share in the first quarter and knocked $600 million off revenue due to lower ad sales from canceled sports events like the NCAA men’s basketball tournament.
“The economic effects of the pandemic and resulting societal changes are currently not predictable,” the company said.
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’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 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.
Revenue at Warner Bros., which released the movies “Birds of Prey” and “The Way Back” in the quarter, declined 8% to $3.2 billion due to “unfavorable comparisons” with the prior-year period. The studio’s operating profit dropped 55% to $249 million.
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.
Overall 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.
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.