AT&T reported lower first quarter net income as the company continued to digest its acquisition of Time Warner and pay-TV subscribers fell.
First quarter net income fell 12.1% to $4.1 billion, or 56 cents a share, from $4.7 billion, or 73 cents a share, a year ago.
Revenue rose 17.8% to $44.8 billion, reflecting the acquisition of Time Warner in the second quarter of last year.
AT&T said that WarnerMedia’s results were not comparable to a year ago. Advertising revenue was $1.3 billion and subscription revenue was $3.4 billion, including $2 billion from Turner networks and $1.3 billion from HBO. WarnerMedia’s operating margin was 26.8%.
AT&T’s Entertainment Group generated a 12.8% increase in operating contribution to $1.5 billion. Entertainment Group revenue was down 0.9% to $11.3 billion. The unit’s operating expenses were down 2.7%, in part because of lower marketing costs and a one-time gain from recent content negotiations, probably the result of the new distribution deal with Viacom.
.Video connections dropped to 23.9 million, including 1.5 million DirecTV Now subscribers, from 25.4 million a year ago. Total video subscribers were down 627,000, including a loss of 83,000 subscribers for DirecTV Now.
AT&T’s advertising unit Xandr generated operating revenues of $426 million, up 26.4 % from a year ago, reflecting the acquisition of AppNexus
The Mobility Group contributed $$5.4 million to AT&T operating income, up 3.7% from a year ago. Mobility revenue was up 1.2% from a year ago.
“Our first-quarter results show that we’re delivering on what we promised,” said AT&T CEO Randall Stephenson.
“We’re on plan to meet our de-leveraging goals with strong free cash flow and asset sales. We grew Entertainment Group EBITDA in the quarter and are confident we’ll meet or exceed our full-year target. FirstNet deployment continues ahead of schedule. And we are recognized for having the nation’s best wireless network, as well as the fastest network,” Stephenson said. All this speaks volumes about our focus on our strategic priorities and our ability to grow our Mobility, WarnerMedia and emerging Xandr businesses. Our teams are executing well and have turned in a good performance to start the year.”