AT&T reported a fall in second-quarter results, as the Covid-19 pandemic hurt advertising, pay-TV and roaming revenues at the company. Net earnings fell to USD 0.17 per share from USD 0.51 a year ago, including a goodwill writedown on its Vrio pay-TV business in Latin America (USD 0.29) and restructuring costs (USD 0.10), and adjusted earnings dropped to USD 0.83 from USD 0.89, including an estimated 9-cent impact from the pandemic.
Revenues fell 8.9 percent year-on-year to USD 40.95 billion. AT&T estimates around 70 percent of the decline was due to the Covid-19 outbreak. The biggest drops were at the Latin America activities, down 30 percent to USD 1.2 billion, and WarnerMedia, down 23 percent to USD 6.8 billion. Wireless service revenue also fell 1.1 percent to USD 13.7 billion, and the Entertainment division posted sales down 11.4 percent to USD 10.2 billion amid a continued drop in TV subscribers.
AT&T reported adjusted EBITDA down 6.2 percent to USD 14.1 billion, while the adjusted operating margin fell only 10 basis points year-on-year, to 21.9 percent. The company estimates it spent around USD 400 million during the quarter on the HBO Max launch, an amount offset somewhat by lower costs for live sports at the broadcast activities.
After capital investment of USD 5 billion, including USD 1 billion on 5G spectrum, the company generated free cash flow of USD 7.6 billion. AT&T said it would pay out 49 percent of free cash flow in dividends, with net debt at 2.6x EBITDA at the end of the period. The pay-out ratio is expected to reach around 60 percent over the full year. Capital investment is expected to total USD 20 billion over the full year 2020.
In terms of customers, the operator lost 151,000 postpaid phone subscribers in Q2. This includes 388,000 customers that will be disconnected once the 'Keep America Connected' pledge for the coronavirus crisis ends. Postpaid phone ARPU fell 1.9 percent to USD 54.47, mainly due to reduced international roaming. Prepaid net adds reached 165,000, with record low churn of less than 3 percent.
In the pay-TV market, the company shed another 954,000 subscribers in the US. The focus on value however led to a 6.4 percent increase in ARPU (excluding OTT) to USD 124.98. Broadband services lost a net 102,000 subscribers, including 159,000 accrued disconnections under the coronavirus scheme, while the fibre broadband base still grew, adding 225,000 subscribers.
