AT&T loses 22K U-verse video subs in Q2, promises DirecTV acquisition will 'transform our industry'

AT&T (NYSE: T) reported losing 22,000 U-verse video customers during the second quarter, a reversal of the 190,000 customer additions the carrier reported during the same quarter a year ago. Conversely, AT&T's rival Verizon (NYSE: VZ) reported it added 26,000 net FiOS video subscribers during the period.

AT&T ended the period with almost 6 million U-verse video subscribers.

The video subscriber figures in the second quarter from AT&T, Verizon and Comcast, which itself reported the loss of 69,000 video subscribers during the quarter, appear to reinforce the notion that the pay-TV industry will contract significantly in the period.

As for AT&T's consumer Internet access business, the carrier reported losing 136,000 broadband customers, though it said it added 241,000 U-verse IP Internet customers--the difference is due to AT&T's efforts to move customers off its legacy DSL service. AT&T said it only has 1 million DSL customers left. AT&T ended the quarter with a total of almost 16 million broadband subscribers. AT&T noted that its 1 Gbps fiber-to-the-home service (FTTH) business is on track and executives said they are happy with the subscriber take rates they are seeing thus far in the markets where it is delivering the service. For more on this topic, click here.

For its part, Verizon added only 72,000 FiOS Internet users in the second quarter, down from 139,000 in the same period of 2014. Verizon blamed its performance during the second quarter on competition in key markets. However, the carrier's CFO, Fran Shammo, said Verizon's "Custom TV" skinny bundle product "continues to exceed expectations," with a third of new FiOS video subscribers opting for it.

In explaining AT&T's broadband and video customer losses during the quarter, CFO John Stephens pointed out that the carrier is working to drive costs out of its business, and he pointed to the uptick in AT&T's revenues as evidence. AT&T said its U-verse consumer revenues clocked in at $4.1 billion, which the carrier said represented an adjusted growth rate of 19.2 percent year over year.

Stephens added that the "second quarter is always seasonally a challenge." He said subscribers such as students are often moving during the summer months.

Finally, Stephens said that AT&T didn't pursue U-verse video customers with heavy promotions during the quarter. "We chose to be very disciplined and very limited in those promotional activities," he said during the carrier's quarterly conference call with analysts. "That's how we think about it."

AT&T said that more than 97 percent of its video customers subscribe to bundled services. The carrier said its average revenues per user for U-verse triple-play customers continues to be more than $170. 

Despite its negative numbers, AT&T promised that its acquisition of DirecTV--which has not officially closed yet, though by all indications will do so shortly--will help the carrier improve its position. Stephens also reiterated that AT&T expects to obtain $2.7 billion in cost synergies as part of the deal, despite any conditions the FCC may impose on the transaction. Earlier this week, FCC Chairman Tom Wheeler indicated AT&T would extend its fiber network to 12.5 million customer locations as a condition of the transaction. Wheeler also said AT&T would be prevented from excluding "affiliated video services and content" from its data caps, and would have to submit Internet interconnection agreements to the commission to encourage transparency.

"We are more confident than ever about the opportunity this transaction brings," Stephens said of AT&T $49 billion acquisition of DirecTV. "We are building a unique communications and entertainment company that we believe will not only transform us but transform our industry as well."

For more:
- see this FierceWireless article
- see this FierceTelecom article
- see this AT&T release

Related articles:
With DirecTV deal set to close, AT&T now ready to fight 'yesterday's war'
Verizon FiOS video growth slows to 26K subs in Q1, but skinny TV bundles 'exceed expectations'
FCC poised to approve AT&T-DirecTV deal, create top pay-TV service in the U.S.

Article updated July 24 to correct AT&T's year-ago subscriber figures and to add additional information.

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