AT&T reported first-quarter revenues down 4.6 percent to USD 42.8 billion, as its WarnerMedia division suffered from the Covid-19 outbreak's impact on the film and TV industry and the operator continued to lose pay-TV subscribers. Ongoing cost-reduction efforts helped limit the impact on profits, and AT&T said it was on track with its strategic investments, while conserving cash for the upcoming economic slowdown. Given the economic uncertainty, the group withdrew its guidance for the year.
The company estimates the coronavirus pandemic took 5 cents off EPS in the quarter, which otherwise would have been in line with expectations. Adjusted EPS fell to USD 0.84 from USD 0.86 a year ago, but would have increased to 89 cents without the extraordinary effect. The adjusted operating margin reached 21.2 percent in Q1, down slightly from 21.4 percent a year ago.
The coronavirus impact was strongest at WarnerMedia, which lost around USD 1 billion in revenue year-on-year and over USD 500 million in adjusted EBITDA. The unit suffered from the suspension of key events such as the NCAA basketball tournament and new cinema releases, a slowdown in advertising due to the reduced economic activity and a halt to most production activities.
The telecom business posted revenues down 2.6 percent to USD 34.2 billion, while adjusted EBITDA rose 2.1 percent to USD 12.8 billion. While AT&T Wireless grew service revenues 2.5 percent, revenues continued lower at the Entertainment group, as the company lost another 1.035 million pay-TV subscribers in the quarter. Mobile subscriber growth slowed to 27,000 postpaid net adds (+163,000 with phones), and the broadband base fell by another 73,000 customers in the three months.
Operating cash flow totaled USD 8.9 billion in the quarter, and capital expenditure reached USD 5.8 billion, leaving free cash flow of USD 3.9 billion. Net debt was at about 2.6x EBITDA at the end of the quarter.
AT&T said its liquidity position and balance sheet remained strong and it had already adjusted capital spending plans and suspended its share buyback. It will continue investing in critical growth areas like 5G, broadband and HBO Max, while maintaining its dividend commitment and paying down debt, CEO Randall Stephenson said.
