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AT&T reported adding 368,000 DirecTV Now subscribers in the fourth quarter of 2017, and is gearing up to launch a next-generation OTT platform later this year.

AT&T’s DirecTV Now subscriber base now totals 1.2 million, surpassing the 1 million mark in December, roughly one year after the OTT TV service was launched.

Figures for legacy video subscribers, however, did not fare as well. AT&T shed a combined 207,000 U-verse TV and DirecTV satellite TV customers, compared to a loss of 27,000 last year. This includes a loss of 147,000 satellite subscribers, which is much worse than Q4 of 2016, when the company gained 235,000. AT&T lost 60,000 U-verse subs, shrinking that customer base to 3.6 million, and leaving it 14.6 percent smaller than last year.

Overall AT&T added a total of 161,000 video subs in Q4. While the legacy video losses were offset by DirecTV Now gains, MoffettNathanson analysts say those lower-margin subscribers aren’t much help.

“As we have discussed at length in the past, however, these customers [DirecTV Now] are almost certainly coming in at a negative margin, making their gains economically worthless at best and deeply dilutive at worst,” MoffettNathanson analysts wrote to investors.

“That the company continues to grow its base of DirecTV Now subscribers isn’t helpful – AT&T loses money on them,” the analysts wrote. “What matters is that their satellite subscribers are leaving. Whether they can stop the declines of high-value legacy satellite subscribers, where they ultimately make all (or more than all) of their profits, will be critical to the company’s fortunes going forward.”

For the quarter, AT&T added 95,000 IP broadband net adds, and lost 76,000 DSL subscribers, for total broadband net adds of 19,000. The company ended the year with 14.35 million broadband subscribers, including 13.46 million “IP” customers and 888,000 DSL customers.

AT&T said more than 7 million customer locations are now passed with its FTTP platform.

AT&T reported consolidated revenues of $41.7 billion for the fourth quarter, flat from $41.8 billion in the year-ago period, which the company attributed mainly to declines in legacy wireline services, wireless service revenues, and domestic video.

Video entertainment revenues for the quarter were $9.35 billion, down from $9.56 billion in the fourth quarter of 2016. AT&T reported high-speed internet revenues of $1.89 billion, down from $1.91 billion a year ago.  

On a Wednesday earning call with investors, AT&T President and CEO Randall Stephenson said the company is planning for an upgraded version of DirecTV Now this spring, and to launch a next-generation streaming device before the end of the year. More on that here.

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