Resurgent customer growth of 214,000 subscribers for AT&T's (NYSE: T) recently acquired DirecTV division was offset in the fourth quarter by losses of 240,000 video subscribers for the legacy U-verse service.
"The DirecTV subscriber additions were stronger than expected … but the U-verse losses were much worse," said MoffettNathanson analyst Craig Moffett, summing up AT&T's fourth quarter pay-TV performance.
"Financially, this is a good trade; a big reason AT&T [acquired DirecTV] was to get out from under burdensome programming costs that plague U-verse. Still, this result is, in aggregate, a clear disappointment," Moffett added.
Factoring in the meager 20,000 net video customer additions for the fourth quarter reported by Verizon (NYSE: VZ) last week for its FiOS platform, pay-TV's telco sector had its worst quarter ever.
AT&T CEO Randall Stephenson said AT&T is still getting its "legs under it" for selling and installing DirecTV. "We don't even have our installation work force up to full speed," he said.
He added that the relationship between DirecTV and U-verse subscriber growth will get better.
"We're doing some things to shore up the U-verse base," he said. "We are focused on the satellite product … But we did some things on pricing to help mitigate the U-verse churn."
Specifically, Stephenson said AT&T tied unlimited wireless plans to U-verse in promotions.
AT&T said its "entertainment group," which includes TV, broadband and other services, had revenue of $13 billion in the fourth quarter. That's an increase of $5.6 billion over the year-ago period. Operating income for the unit was $1.5 billion, an improvement over a $296 million loss in the fourth quarter of 2014. AT&T attributed much of the improvement to the DirecTV acquisition.
AT&T did not make a major announcement regarding its much anticipated mobile video offering.
"Things are coming together very nicely," Stephenson said. "You're going to see a phased rollout over the next 45 days."
Overall, AT&T reported total revenue of $44.1 billion for the fourth quarter, a 22 percent uptick over the year-ago period, and driven primarily by the net additions of 2.8 million wireless connections.
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