AT&T CFO John Stephens Says TV Customer Losses Have "Peaked"

AT&T CFO John Stephens-Publicity-P-2019

"It's tough and we'll go through it for the rest of this year," Stephens told an investor conference.

With AT&T under pressure from activist investor Elliott Management to turn around its business performance, CFO John Stephens on Tuesday said he expected fewer future TV customer losses for the telecom giant.

"It's tough and we'll go through it for the rest of this year. But we're optimistic we've hit the peak of losses in the third quarter," Stephens told the Wells Fargo TMT Conference during a presentation that was webcast.

AT&T in October with its third-quarter financials reported losing 195,000 subscribers at its DirecTV Now streaming service, after a 168,000 loss in the second quarter, while losing another 1.2 million premium TV subscribers at DirecTV and U-Verse.

"We're looking for AT&T TV and the anniversary of this new intake approach to much more rational product offerings to take us forward. It's a challenging business," Stephens added. In 2020, AT&T is looking for better premium TV subscriber numbers as it has fewer TV customers with promotional pricing on its books and launches AT&T TV, a premium streaming offering.

Stephens' optimism about future TV customer losses follows Elliot Management in a Sept. 9 letter to the AT&T boardroom arguing it had acquired DirecTV "at the absolute peak of the linear TV market," which was followed by TV customers defecting to lower-cost streaming services.

After acquiring $3.2 billion of AT&T stock, Elliott Management called for changes at the telecom and entertainment giant, and argued that its acquisition strategy in particular had hurt the company's shares and performance.

As WarnerMedia gets set to launch HBO Max against Netflix, Apple + and Amazon Prime, Stephens reiterated an earlier AT&T forecast that the new streaming service is expected to nab around 50 million domestic subscribers by 2025. "We're going to become a company that has a very significant streaming opportunity," he told investors.

WarnerMedia will launch the HBO Max streaming service in spring 2020 with library content and scripted originals, as well as content from the media giant's cable networks portfolio, including HBO, TNT and TBS. The direct-to-consumer platform will join Netflix, Amazon, Apple, Disney and NBCUniversal in the streaming wars.

When asked about challenges facing AT&T, Stephen noted the domestic media and video market was fast-changing and faced economic headwinds. "It's a competitive environment. There's technology changes and new competitors. The economy has its ups and downs. We're seeing a more moderate, or not as exciting, business investment cycle," Stephens warned.

But he added consumers will continue to use their mobile phones and broadband Internet, despite whatever economic turbulence may be ahead.