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AT&T Entertainment & Internet Unit Posts Profit After DirecTV Merger

22 Oct, 2015 By: Erik Gruenwedel

Corporate mergers typically grow revenue and, hopefully, profit as well.

That proved true for AT&T’s Entertainment and Internet Services (EIS) unit, which generated $1 million in third-quarter (ended Sept. 30) operating income compared with a loss of $337 million during the prior-year period. Revenue totaled $10.9 billion, which was up 96% year-over-year due to the July 24 closing of AT&T's $49 billion acquisition of satellite TV operator DirecTV.

“Our early integration efforts with DirecTV are going very well and we’ve just begun to scratch the surface on the video, wireless and broadband cross-selling opportunities,” CEO Randall Stephenson said in a statement.

AT&T added 26,000 DirecTV subscribers following the merger close, while losing 92,000 U-verse video subs. The telecom ended the quarter with 25.4 million combined video subs — 14% more than Comcast and nearly 72% above a combined Charter/Time Warner Cable.

EIS added 172,000 broadband subscribers and lost 278,000 DSL subs for a total of 14.3 million when including DirecTV broadband subs. Many of the U-verse broadband losses were a result of bundling with U-verse video — a challenge Stephenson said AT&T is dealing with.

“We are confident we can work through this,” he said on the fiscal call.

During the quarter AT&T continued to roll out ultra-high-speed broadband service with upwards of 1 gigabit-per-second speed in San Antonio, Texas, Orlando, Fla., and Greensboro, N.C.

AT&T also expanded NFLSundayTicket.TV, a separate broadband-only component of DirecTV’s “NFL Sunday Ticket” for consumers unable to subscribe to the satellite TV operator.

The company is actively selling DirecTV service throughout its 2,300 company-owned AT&T retail stores, including training store personal unfamiliar with selling video services.

“Essentially, we converted a quality video business with limited scale into an industry leader, earning solid margins through our DirecTV acquisition,” Stephenson said.

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