AT&T Added More Than 200,000 Video Subs in Fourth Quarter, "Entirely Driven by DirecTV Now"

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DirecTV Now launch event

The streaming service launched at the end of November.

Telecom giant AT&T, which has agreed to acquire Time Warner for $85.4 billion, said in a regulatory filing on Friday that it will report "more than 200,000 video net adds" for its fourth quarter, with the figure being "entirely driven by DirecTV Now."

The company launched the streaming video service at the end of November and previously only said that its fourth-quarter earnings report would shed some light on the early subscriber performance.

AT&T said the figure it cited "includes only paying customers." AT&T's video subscription business includes U-verse, DirecTV's traditional satellite TV service and DirecTV Now, which offers several versions, including a free advertising supported service.

Asked what the reported figure means for all of DirecTV, Macquarie Capital analyst Amy Yong said: "They gained 200,000 mostly from DirecTV Now and possibly more from the ad-based service."

Wells Fargo analyst Jennifer Fritzsche said in a note: "We believe this DirecTV Now sub add is ahead of expectations." And BTIG analyst Richard Greenfield tweeted: "Over 200,000 paying subs for @directvnow ... but, unclear how many tied to 3-month lock-in for free Apple TV deal."

Appearing at the Citi Internet, Media & Telecommunications Conference in Las Vegas earlier this month, John Donovan, chief strategy officer and group president for AT&T Technology and Operations, said the company would “lay out some of the customer metrics” for DirecTV Now when it reports its earnings on Jan. 25. “You’ll be able to judge at that point how successful it is.”

In early December, AT&T chairman and CEO Randall Stephenson said that the first few days of the new streaming service, which launched Nov. 30 starting at $35 per month, had gone well. The executive said the firm reached its subscriber forecast for all of December on the first day, but didn't provide figures or give details of the forecast.

“The early demand has been rather dramatic,” exceeding expectations, he said. And he added that HBO and Cinemax attach rates for $5 a month have been strong.

Wall Street analysts are paying close attention to DirecTV Now and its uptake, with industry watchers debating what it will mean for entertainment companies, Netflix and others.

For the final quarter of 2016, AT&T also said it expects to "record a non-cash, pre-tax loss of approximately $1.0 billion related to the annual re-measurement of pension and post-employment benefit plans."

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