AT&T has reiterated a target to return its mobile business to service revenue growth over the full year 2018. However, the company warned for continued weakness in the pay-TV market and said its international operations are suffering from the stronger dollar. The updated outlook was given by AT&T CEO Randall Stephenson and CFO John Stephens at an investors conference held by WellsFargo.
The US operator said it expects "continued solid growth" in its Mexico wireless operations in the second quarter, with as many as 700,000 net adds and improving churn. However, the strengthening US dollar and volatility in foreign exchange rates are expected to pressure International segment results. For its domestic wireless business, service revenues are expected "essentially flat" in Q2, but should return to growth over the full year.
AT&T said it also expected continued pressure on revenues and margins in the Entertainment Group, due to the transition in the US pay-TV market. For the quarter, the company expects total video and broadband subscribers to increase, with DirecTV Now subscribers more than offsetting continued declines in traditional TV subscribers. Stephenson said that the mix will continue to shift to over-the-top video.
Separately, the company revealed pricing for its new unlimited mobile plans that come bundled with the new WatchTV streaming service. AT&T Unlimited &More starts at USD 70 for the basic version and USD 80 for the Premium plan, and customers can add up to four additional lines for USD 40 each.
AT&T will release Q2 results 24 July, including Time Warner from 15 June. The operator reiterated its target for USD 2.5 billion in synergies from the Time Warner acquisition by 2021, including USD 1 billion in revenues and USD 1.5 billion in costs. The takeover should contribute to adjusted EPS and free cash flow within the first year and strengthen AT&T's ability to pay dividends. The takeover led to a debt ratio of around 2.9x, and AT&T said it aims to reduce this to 2.5x by the end of the first year after closing the deal.
Furthermore, AT&T is preparing to launch a real-time ad exchange platform following the completion of its USD 85.4 billion acquisition of Time Warner, Stephenson said. The platform should be rolled out within 24 months and will differ from digital platforms like Facebook and Google by offering marketers the chance to place their brands next to premium content, according to the CEO. He added that AT&T will see benefits right away by being able to manually sell Turner’s inventory paired with AT&T’s consumer data.
The AT&T chief executive also revealed when the platform is up and running, AT&T will be able to serve short, targeted ads on the TV when it knows viewers have a smartphone in their pocket, and allow them to further engage with the marketing while not interrupting the programming on the big screen.
