WarnerMedia, Xandr Buoy AT&T Earnings in 4Q

DirecTV Now loses subscribers
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AT&T reported strong 4th quarter results for its WarnerMedia and Xandr units, but net income was down compared to a year ago because of big gains last year due to tax law changes.

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The company’s entertainment group lost 391,000 TV subscribers in the fourth quarter, including 267,000 streaming DirecTV Now subscribers as the company scaled back promotions.

Warner Media’s operating income was $2.6 billion in the fourth quarter, up 33% from $2 billion a year ago, with double digit gains at all three divisions. Warner Media is largely made up of the assets of Time Warner, acquired by AT&T last year.

Revenue rose to $9.2 billion, up 5.9%.

At Turner, operating income was $1.3 billion, up 20.7% reflecting a decline in expenses.

Turner revenue was $3.2 billion, down slightly. Ad revenue was down 6.3% while subscription revenue was up 3.7%.

At HBO, operating income was up 28.5% to $622 million due to a decrease in expenses. HBO revenue was 1.7 billion, down 0.4%. Revenue was hurt by the ongoing carriage dispute with Dish, which began in November.

Warner Bros operating income rose 57.2%. Revenue was $4.5 billion, up 10.4%, due to strong performances by theatrical releases. TV revenue was up 3.9%. 

The company’s Xandr advertising unit increased revenue by 48.6% to $566 million, or 26% excluding the acquisition of AppNexus. Operating income was up 15.8% to $381 million.

Related: AT&T Sees Turner Selling Addressable Ads in 2019

Revenues were down 4.8% to $12 billion for AT&T’s Entertainment Group, reflecting declines in TV subscribers. Broadband revenues were up 6.4%. Operating income was down 33.2% to $669 million.

For 2018, The company’s DirecTV unit had 19.2 million subscribers, down 1.2 million, or 6%. Its Uverse service added 50,000 subscribers, or 1.4%. Its streaming DirecTV Now vMVPD had 1.6 million subs, up 37%. Overall, AT&T wound up with 3% fewer video subscribers.

Overall AT&T’s fourth quarter net income was $4.9 billion, pr 66 cents a share, compared to $19 billion, or $3.08 a share, a year ago, when large companies got a financial windfall from the new tax law. The company said adjusted earnings were 86 cents a share compared to 78 cents a year ago.

Revenue was $48 billion, up 15%, primarily do to the acquisition of Time Warner. Without an accounting change, revenue rose 17.2%.

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Randall Stephenson

The company reaffirmed its financial guidance for 2019 and said its plan to reduce debt is on track.

“Our top priority for 2018 and 2019 is reducing our debt and I couldn’t be more pleased with how we closed the year," said AT&T CEO Randall Stephenson. "In 2018, we generated record free cash flow while investing at near-record levels. Our dividend payout as a percent of free cash flow was 46% for the quarter and 60% for the year, allowing us to increase the dividend for the 35th consecutive year. This momentum will carry us into 2019 allowing us to continue reducing our debt while investing in the business and continuing our strong record for paying dividends.”

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