AT&T Inc. continued to shed wireless and television subscribers in the first quarter of the year as cheaper data plans and cord cutting took a toll.
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AT&T, the biggest U.S. pay-television operator after its $49 billion acquisition of DirecTV, reported its video business lost 233,000 customers in the quarter. It declined to say how many people subscribed to DirecTV Now, though company executives said they weren't giving up on the online TV service and plan to advertise it more heavily later this year.
AT&T's wireless business, its main moneymaker, lost 348,000 mainstream wireless phone customers, marking a return to the large losses characteristic of the past two years after an easing in the previous period. Phone additions are considered important because they are the most lucrative mobility accounts, and customers with postpaid phone accounts tend to stay longer.
AT&T, like its telecommunications rival Verizon Communications Inc., faced heightened competition from unlimited-data plans offered by T-Mobile US Inc. and Sprint Corp. Both of the larger companies rolled out their own unlimited offers, though AT&T Chief Executive Randall Stephenson said during a call with analysts that "this has made an already competitive market even more so, and our response to the unlimited data plans was probably a little slow."
AT&T in October agreed to buy Time Warner Inc., a tie-up that would transform the phone company into a media giant and make it less dependent on the lagging phone business. Mr. Stephenson said the deal, currently under review by the U.S. Justice Department, was "moving along as expected" and that AT&T expected its approval this year.
The deal for Time Warner -- owner of CNN, TNT, HBO and the Warner Bros. film and TV studio, among other things -- is seen helping AT&T potentially find new areas of growth as its core wireless business has become saturated and its share of the mobile market leaves little room for acquisitions. In the competitive consumer wireless market, AT&T has been focused on retaining its most profitable customers and shying away from promotional offers to grab market share.
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AT&T earned a first-quarter profit of $3.5 billion, down from $3.8 billion a year earlier. Revenue fell 2.7% to $39.37 billion. Analysts were looking for $40.53 billion.
The company also rescinded its 2017 sales growth target, blaming the unpredictability of wireless handset sales as customers hold on to their smartphones for longer. It had previously said it expects revenue to grow in the low single digits.
Shares climbed 0.4% after hours to $40.08.
Write to Drew FitzGerald at firstname.lastname@example.org and Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
April 25, 2017 18:29 ET (22:29 GMT)