A PYMNTS Company

Make No Mistake, AT&T Is in Limbo

 |  February 1, 2018

Posted by Bloomberg

By Tara Lachapelle

Make No Mistake, AT&T Is in Limbo

Going to court isn’t fun. But for AT&T Inc., its day can’t come soon enough.

The company reported year-end results on Wednesday and, as promised, showed that it technically managed to add video-entertainment subscribers for the first time since before it bought DirecTV in 2015. Don’t get too excited, though.

The DirecTV satellite business — for which AT&T paid $49 billion plus the assumption of debt — is still bleeding customers. DirecTV Now, the cheaper over-the-top streaming service born out of that business, is what’s offsetting the declines: The app had an impressive 1.2 million subscribers as of December. The key word there is cheaper. Or as Craig Moffett of MoffettNathanson put it in a recent note, there’s “little economic offset from a growing OTT business.”

It highlights the problem for traditional pay-TV providers looking to smaller online offerings, such as DirecTV Now, as the future. The operating margin for AT&T’s entertainment division, which houses all these TV services, is already contracting — it was 8.4 percent in the fourth quarter, down from 10.3 percent a year earlier.

Continue Reading…