AT&T expects nearly 300,000 DirecTV Now net adds, though total US video subscribers will fall by about 90,000. AT& said the video net losses were driven by heightened competition in the traditional pay-TV markets and OTT services, and hurt by the recent hurricanes and stricter credit standards. The decline of traditional video subscribers negatively hit Entertainment Group revenues and margins, which means the adjusted operating profit margin will be essentially flat year-on-year.
The company continued to expand its postpaid smartphone base even with nearly 900,000 fewer handset equipment upgrades, against the year before. These lower upgrades will have a negative effect on wireless equipment revenue. This trend will however not affect gross adds and AT&T continues to see low postpaid phone churn levels.
AT&T started reporting prepaid Internet of Things (IoT) connections from July as a separate class within subscriber categories. These connections primarily relate to customers that actively subscribe for vehicle connectivity. This will result in 97,000 additional prepaid net adds in the quarter with a corresponding decline in connected device net adds. The prepaid subscriber base will be adjusted by an increase of 543,000 connections with a corresponding decline in the connected device subscriber base to reflect subscriber activity prior to the third quarter.
