AT&T met its debt and cash flow targets for 2019, as well as reporting a small increase of 1.4 percent in adjusted earnings. Results for the fourth quarter showed another loss of over 1 million TV customers, as well as lower revenues at WarnerMedia, as the company ended certain content licensing deals in anticipation of the launch of its own streaming service HBO Max this spring. The company confirmed its three-year targets issued in October.
Annual revenues rose to USD 181.2 billion from USD 170.8 billion thanks to the takeover of Time Warner, and the adjusted operating margin improved to 21.3 percent from 20.6 percent in 2018. Net profit fell to USD 13.9 billion from USD 19.4 billion due to a number of one-time charges for the takeover, divestments and restructuring, while adjusted EPS was up slightly to USD 3.57 from USD 3.52 the previous year, in line with the outlook for low single-digit growth.
Free cash flow up, net debt down in line with guidance
Free cash flow rose to USD 29.0 billion from USD 22.4 billion in 2018, better than forecast, and AT&T stuck to its pledge to pay out at least 50 percent of cash flow as dividends, with a ratio of 51 percent for the year. The company also spent about USD 2 billion buying back shares during Q4.
Net debt was reduced by USD 7.6 billion in the quarter and fell by USD 20.3 billion for the full year. This allowed the company to finish the year with net debt at about 2.5x adjusted EBITDA, in line with its target. AT&T said it completed around USD 18 million in asset monetisations last year, including measures to improve working capital.
Q4 results lower
For the fourth quarter, revenues fell to USD 46.8 billion from USD 48.0 billion a year ago. Growth of 1.8 percent in mobile service revenues in the US was offset by declines in US pay-TV, legacy wireline services and WarnerMedia. Without the impact of foreign exchange pressures and HBO Max investments in the form of foregone WarnerMedia content licensing revenues, revenues would have increased in both the fourth quarter and the full year, AT&T said.
Quarterly operating profit was hit by a charge of USD 1.3 billion to write off copper network assets. On an adjusted basis, profit was also lower, at USD 9.2 billion versus USD 9.4 billion, while the margin was unchanged at 19.6 percent. Net profit for the quarter halved to USD 2.4 billion, while adjusted EPS was up slightly, to USD 0.89 from USD 0.86 in Q4 2018.
Growth in mobile; TV and broadband lower
At AT&T Wireless, the company maintained its EBITDA margin unchanged year-on-year at 40.3 percent, as service revenues grew 1.8 percent and equipment revenues fell 2.1 percent. The operator added 229,000 postpaid phone customers in the quarter, out of total net adds of 3.6 million, and postpaid phone ARPU was up 0.4 percent year-on-year to USD 55.52. Connected device growth remained strong, with 3.7 million connections added, and AT&T said it added a gross 6.8 million smartphones to the network in the period.
Residential pay-TV revenues fell 7 percent in Q4, as AT&T slowed the loss of subscribers only slightly compared to previous quarters. The group shed another 945,000 premium TV subscribers, as well as 219,000 customers at the online service AT&T TV Now. This contributed to the loss of 182,000 broadband subscribers in the quarter, due to some customers on bundled contracts. EBITDA at the Entertainment division, which includes pay-TV and residential telecom services, fell 5.2 percent to USD 2.0 billion.
At WarnerMedia, quarterly revenues dropped 3.3 percent to USD 8.9 billion, and operating profit declined 7.7 percent to USD 2.4 billion. AT&T Business posted revenues down 1.7 percent to USD 6.6 billion, but improved its EBITDA margin to 38.4 percent from 38.0 percent a year ago thanks to an improved sales mix and cost efficiency measures.
