AT&T expects to lose about 1.1 million TV customers in the third quarter as it faces pressure from an investment group that says AT&T's increased focus on the TV business was a giant mistake.
In an update to shareholders yesterday, AT&T CFO John Stephens "said the company expects an incremental 300,000 to 350,000 premium video losses above the previous quarter's premium video results," according to AT&T. Since that's an incremental increase over the previous quarter's loss, that will amount to a three-month loss of more than 1 million TV customers.
In Q2 2019, AT&T reported a net loss of 778,000 subscribers in the "Premium TV" category, which includes its DirecTV satellite and U-verse wireline TV services. With AT&T expecting to lose that amount of subscribers plus another 300,000 to 350,000, the update to shareholders suggests the Q3 loss in the category will be between 1,078,000 and 1,128,000 subscribers. (An AT&T spokesperson confirmed to Ars that a projected loss of 1,078,000 and 1,128,000 subscribers in Q3 is accurate.)
AT&T's TV strategy was criticized this week in an open letter by activist investor Elliott Management Corp., which has a $3.2 billion stake in AT&T.
"Notwithstanding AT&T leadership's assertions that 'Pay TV is a very good, durable business' when the [DirecTV] transaction was announced, the pay-TV ecosystem has been under immense pressure since the deal closed," the investor firm said. "In fact, trends are continuing to erode, with AT&T's premium TV subscribers in rapid decline as the industry, particularly satellite, struggles mightily. Unfortunately, it has become clear that AT&T acquired DirecTV at the absolute peak of the linear TV market."
Elliott Management is also skeptical of the Time Warner buy. "[D]espite nearly 600 days passing between signing and closing (and more than a year passing since), AT&T has yet to articulate a clear strategic rationale for why AT&T needs to own Time Warner," the open letter said.
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Including debt, buying DirecTV cost $67 billion and Time Warner cost $109 billion.