Spotlight on AT&T's Media Strategy as Wireless Loses Luster
Unlimited wireless data plans have made a comeback this year, forcing U.S. carriers to find new ways to set themselves apart from the competition.
AT&T Inc., the No. 2 wireless carrier by subscribers, is answering with other services: home television through its DirecTV and U-verse brands, and, if regulators bless its pending Time Warner Inc. takeover, discounted access to entertainment on every screen.
Questions about that strategy will overshadow AT&T's financial results scheduled for release Tuesday, partly because of low expectations for its core wireless business. Average revenue per user, a key measure of phone companies' fundamental health, has slid industrywide for the past three years, according to investment bank UBS AG.
It follows rivals Verizon Communications Inc., which last Thursday reported its first-ever net subscriber loss, and T-Mobile US Inc., which is expected to report on Monday. Thanks in part to its own all-you-can-eat data plans, T-Mobile has snapped up many former Verizon and AT&T customers.
All three companies, as well as No. 4 carrier Sprint Corp., now offer plans that promise unlimited data usage, a strategy that could force them to boost spending to keep up with customers' voracious online habits.
AT&T still spends heavily on network upgrades but has been conservative of late to preserve its bottom line. The company bid $910 million in the Federal Communications Commission's latest auction of spectrum licenses, an amount small enough that the company recouped most of the multibillion-dollar down payment it paid to enter the auction.
The auction's end means wireless companies will soon be freed from legal obligations that prevented them from holding deal talks. But AT&T's hands are still tied because of its continuing $85 billion bid for Time Warner, a distraction that could keep it on the sidelines as rivals trade wireless licenses and contemplate larger moves.
U.S. regulators have approved similar combinations of telecom and entertainment in the past. But President Donald Trump, a critic of Time Warner channel CNN, has said during his campaign that the deal should be blocked.
His nominee to lead the Justice Department's antitrust division, Makan Delrahim, is awaiting Senate confirmation, so in the meantime the department has begun sending questions to other telecom and media companies potentially affected by the combination, according to people familiar with the matter. That is good news for AT&T, which can get to work marketing its new shows and cutting costs the sooner the merger review ends.
Another bright spot AT&T can count on is its advertising business. The company earlier this year said AdWorks, its ad division, was generating more than $1 billion a year of revenue and growing at a double-digit rate.
That alone is hardly enough to rescue the broader company if customers start to bolt in droves but offers hope for the future.
Shalini Ramachandran contributed to this article.
Write to Drew FitzGerald at email@example.com
(END) Dow Jones Newswires
April 22, 2017 08:14 ET (12:14 GMT)