AT&T CEO Says He Expects Pandemic's Effects to Linger Into 2021
AT&T continues to see big pandemic challenges and believes effects will long linger, executives said Thursday as it became the first national wireless carrier to report Q2 earnings. “We’re planning and operating under the assumption that significant accommodations for COVID will be the business norm well into next year,” said CEO John Stankey on an investor call. The stock closed 0.9% lower Thursday at $29.90. Verizon reports results Friday.
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The "pandemic impacted revenues across all segments,” the company said. “Declines at WarnerMedia included lower content and advertising revenues partly due to COVID-19. Revenues also declined in domestic video and legacy wireline services.”
The novel coronavirus “had a significant impact on our WarnerMedia segment with advertising revenues, content production and theaters all shut,” Stankey said. AT&T said COVID-19 had a $300 million impact on the entertainment group through lower advertising demand and lower commercial volume. COVID limited AT&T’s ability to go into some customers’ homes for fiber installs, he said. Mexico had lower equipment sales from pandemic-related store closures and prepaid customers were unable to renew their service, he said. In the U.S., some of the least productive stores won’t reopen and other locations will shift to independent distributors, Stankey said.
More customers are upgrading handsets than earlier in the pandemic, Stankey said. New handsets are expected this year that will mean more store traffic, he said. “The biggest wild card … is what’s happening in states that are pressured a little bit with COVID,” he said: “Hopefully, as people try to get the infection rate under control, it’s not an entire lockdown again. From my point of view, that doesn’t seem to be necessary.”
The disease will mean continuing uncertainty, Stankey said: “It’s too early to tell exactly what’s going to occur, and I expect as we get into the latter part of the third quarter, maybe we have a little bit better visibility of what 2021 looks like.” Stankey plans to spend time with the board in September “looking at the investment opportunities that are in front of us and how we want to deploy capital.”
Wireless growth was flat despite the push to 5G. AT&T reported 151,000 postpaid phone net losses and 135,000 prepaid phone adds. Postpaid churn was 1.05% versus 1.07% in the year-ago quarter. Operating income was $3.5 billion, down from $7.5 billion. Revenue was $41 billion versus $45 billion. COVID-19 affected earnings by 9 cents per share, “with $2.8 billion of lost or deferred revenues,” said Chief Financial Officer John Stephens.
Some 159,000 broadband subscribers are counted as disconnects even though they remained active on the network through the FCC Keep America Connected pledge. “We’re actively contacting, working with and trying to retain these customers, and certainly we haven’t given up on that, and they haven’t given up on us,” Stankey said.
Results were in line with estimates, New Street’s Jonathan Chaplin told investors. “The underlying trends in the operating segments were mostly worse than expected and deteriorating,” he said: “Postpaid phone adds missed on higher churn; the turnaround driven by new spectrum doesn’t seem to be happening. In entertainment, pay-tv adds and [earnings] missed by a country mile.”
AT&T said Thursday its 5G network is now available nationwide. Starting Aug. 7, customers with an unlimited starter wireless plan can add 5G starting at $35 a month for four lines.