AT&T’s traditional TV set to tank in Q3 | Major Businesses | Business
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When a respected analyst says that no one expected your quarterly video subscriber results to be good, but doubts anyone expected them to be so bad, maybe it is time for AT&T to be worried about its TV business after posting its financial guidance.

directv now 23 aug 2017Commenting on an 8-K form — a current report US companies must file with the country’s stock exchange to announce major events that shareholders should know about — filed after close of business on 11 October, analyst MoffettNathanson has sounded the alarm on what is a significant trend in the company’s video business.

In the guidance, even though it forecasts gaining 300,000 subscribers for its over-the-top (OTT) offerings, AT&T expects to lose 390,000 traditional video subscribers in the quarter. The 8-K states that the effect of hurricanes and flooding during the reporting period were contributory factors, but the top-line stated trend is that video net losses were driven by heightened competition in traditional pay-TV markets and OTT services.

The analyst’s co-founder, Craig Moffett, said there were four main important takeaways from AT&T’s video guidance. He said: “First, it should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting. Second, it should now also be clear that the pressure Comcast acknowledged in its own video subscriber numbers was not a function of elevated competitive intensity from AT&T. DirecTV and Comcast are seeing and responding to the same secular pressures. The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other. It is reasonable to expect a weak quarter for the whole pay-TV industry.

“Third, it is becoming increasingly clear that the wheels are falling off of satellite TV. We would expect Dish Network’s satellite result to be similarly weak as well. Fourth and finally (since it is a topic of increasingly frequent speculation), the weakness at DirecTV makes an AT&T acquisition of Dish Network all but unthinkable. Sure, the weaker the numbers get, the easier it would likely be to gain regulatory approval. But it is certainly also the case that the weaker the numbers get, the less AT&T would want more of the same.”

MoffettNathanson believes the weakness in AT&T’s pay-TV numbers shines a new light on the spate of aggressive promotions at AT&T, notably that almost all of them appear to be centred on bundling, with the benefit seemingly toward bolstering video metrics at DirecTV. It suggests that AT&T might want to focus on stemming the erosion of its traditional video subscribers and that the 8-K could lend credence to the analyst’s hypothesis that AT&T’s promotions might be an expensive attempt to stem such a decline.