After losing 452,000 satellite TV customers in the first nine months of 2017, DirecTV will likely report even more attrition when parent company AT&T announces its fourth-quarter earnings Tuesday.
“We expect an accelerating contraction of the video base, with a loss of 146,000 satellite subscribers, with little economic offset from a growing OTT business,” said MoffettNathanson analyst Craig Moffett in a note to investors this morning examining AT&T’s economics following last month’s Republican-led corporate tax giveaway.
In justifying his firm’s decision not to upgrade AT&T’s stock from neutral following a major rollback in corporate taxes, Moffett cited fierce U.S. competition from Verizon and T-Mobile on the wireless side and equally challenged economics in wireline.
“Secular headwinds for the satellite TV business, which represents the majority of the [wireline] segment, are worsening rapidly,” he said.
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Indeed, DirecTV’s linear fortunes have shifted rapidly, following AT&T’s first full fiscal year with the platform—DirecTV added 1.228 million users in 2016 and 235,000 customers in the fourth quarter of that year.
Users appear to be shifting over to the 14-month old DirecTV Now virtual MVPD platform, which had what AT&T said was around 1 million subscribers at the end of November. Analysts including Moffett have been notably bearish on the ability of vMVPD platforms to generate enough revenue to significantly offset linear losses—although the satellite carriers, including Dish Network, have been optimistic that development of advanced advertising on vMVPD platforms will render them far more profitable in the future.
In any event, Moffett not thinks AT&T is stuck with a DirecTV asset it paid nearly $50 billion for three years ago.
“It would be hard to imagine, for example, that AT&T would be able to sell DirecTV for anything close to 5.5x EBITDA,” he wrote.