AT&T reported a strong finish to 2020 in terms of customer growth in Q4 and met its annual targets for cash flow. Revenues still fell 2.4 percent year-on-year to USD 45.7 billion due to the impact of the pandemic on the Warner Media films business and mobile roaming revenues. A writedown of USD 15.5 billion on its pay-TV business up for sale led to a loss for the quarter and year, and underlying earning suffered from higher costs for increased phone sales and the launch of the HBO Max streaming service.
The operating result was a loss of USD 10.7 billion versus a profit of USD 5.3 billion in the year-ago quarter. Excluding one-time items, the operating margin fell to 17.1 percent from 19.6 percent a year earlier. The net loss totaled USD 13.9 billion or USD 1.95 per share, compared to a profit of USD 2.4 billion or 33 cents per share in Q4 2019. On an adjusted basis, EPS fell to USD 0.75 from 0.89; this does not include an estimated negative impact of 8 cents from the Covid-19 crisis (+1 cent in cost reductions and -9 cents from lost revenues).
Capital expenditure was reduced 37 percent to USD 2.4 billion in the quarter and fell by 20 percent over the full year to USD 15.7 billion. This left AT&T with USD 7.7 billion in free cash flow for the quarter, and the full-year figure was down to USD 27.5 billion from USD 29.0 billion in 2019. AT&T said it paid out 55 percent of the cash flow in dividends, while net debt was reduced by USD 1.6 billion in the quarter and USD 3.5 billion over the year, leaving the company with net debt at 2.70x adjusted EBITDA at year-end.
AT&T expects slightly lower free cash flow in 2021 of around USD 26 billion, as capex increases to an estimated USD 18 billion. Dividends should reach the high 50s pay-out range. The company targets stable adjusted EPS in the new year, based on 1 percent growth in revenues. In 2020, annual revenues fell 5 percent and adjusted EPS declined 11 percent.
Telecom revenues up 0.5%, led by mobile
The telecom business reported fourth-quarter revenues up 0.5 percent year-on-year to USD 36.7 billion, while operating profit fell 12.7 percent to USD 6.6 billion. Revenue growth was led by the mobile business, up 7.6 percent to USD 20.1 billion in revenues, thanks to over 28 percent growth in equipment revenues and 0.5 percent higher service revenue.
AT&T added a total 5.86 million mobile lines in the three months, including 4.81 million connected devices and 760,000 phones. Postpaid net additions increased nearly ten-fold compared to a year ago to 1.23 million, including 800,000 phones.
The pay-TV business remained the main weak point, with revenues down 11.2 percent year-on-year to USD 7.2 billion. AT&T managed to roughly halve the loss in TV customers to 644,000 in Q4, but the total base was still down 16 percent over the full year to 17.16 million. The residential broadband customer base was largely stable over the year at 14.1 million, but fibre growth accelerated to add over 1 million subscribers in 12 months for a total of nearly 5 million, offsetting the drop in DSL.
HBO Max subscribers double in Q4
The operator said its streaming strategy, to release new films simultaneously online and in cinemas, appeared to pay off. HBO Max grew to 17.2 million customers at year-end, doubling from 8.6 million in September. Including the linear channel HBO, total subscribers numbered nearly 61 million worldwide, and HBO's quarterly revenues rose 12 percent to USD 1.9 billion. This was offset by the drop at Warner Bros, leading to total sales at Warner Media of USD 8.6 billion, down 9.5 percent year-on-year.
