AT&T reported lower second-quarter earnings as the company continued to shed subscribers at its DirecTV and DirecTV Now services and Latin America losses grew.
Net income fell to $3.7 billion, or 51 cents a share, from $5.1 billion, or 81 cents a share.
Operating income grew 3.8% to $7.5 billion from $6.5 billion a year ago primarily because of the acquisition of Time Warner. Adjusted EBITDA was $15 billion, up 0.8% on a pro-forma basis.
Revenues rose 15.3% to $45 billion, or 0.6% on a pro-forma basis accounting for the Time Warner acquisition.
The company increased its estimate for this year’s free cash flow to about $28 billion. It reaffirmed its other financial guidance.
WarnerMedia--made up mainly of the Time Warner businesses--grew adjusted EBITDA by 5.4% to $2.0161 billion. Revenue was up 5.5% to $8.35 billion.
The company said it would be providing additional details about its upcoming streaming service--dubbed HBO Max-- on Oct. 29 at the Warner Bros. studios in California.
Turner ad revenue fell 4.4%, with domestic ad revenue down 4%. The NCAA Championship game moving to CBS from Turner this year was responsible for most of the decline. WarnerMedia earlier this month said that ad sales president Donna Speciale is leaving the company.
Overall Turner operating income was up 15.1% to $1.2 billion. Revenue rose 1.9% to $3.4 billion, with subscription revenues up 3.9% and content revenues up 33.1%, offset by the decline in ad revenues.Operating expenses were down 3.7%.
HBO operating income was up 0.7% to $573 million. Revenue was up 2.9% to $1.7 billion. Costs were up 4.1% with programming, distribution and marketing expenses up.
Warner Bros operating income was up 30.2% to $440 million. Revenue was up 2.5% to $3.4 billion. Revenues from Warner Bros. television product was down because of lower licencing revenues.
AT&T continued to lose pay-TV subscribers, with DirecTV and U-Verse subscribers falling by 778.000 subscribers to 21.6 million and a net loss of 168,000 DirecTV Now subscribers. DirecTV Now currently has 1.3 million subscribers.
The company said AT&T TV, the company's new thin-client broadband video service is expected to begin trials in the third quarter.
Operating income for AT&T Entertainment Group, which includes DirecTV was up 2.6% while revenues fell 1% to $11.368 billion.
Xandr, AT&T advanced advertising unit, grew adjusted EBITDA by 1.5% to $338 million. Revenue rose 23.7% to $485 million.
Latin America losses grow to $221 million from $165 million a year ago. Revenues were down 9.9% to $1.8 billion.
“We’re halfway through the year and on track to deliver on all our 2019 priorities. We continue to pay down debt and are more confident than ever that we’ll meet our year-end deleveraging goal, and we’ll take a look at buying back stock,” said Randall Stephenson, AT&T chairman and CEO.
“Our operating teams continue to deliver solid results. Our wireless business grew revenues, profitability and phone customers, both postpaid and prepaid. WarnerMedia delivered another strong quarter with both revenue and operating income growth. And our Entertainment Group profitability continued to stabilize, and even grow,” Stephenson said..