AT&T Adds 202,000 U-verse Pay TV Subscribers in Second Quarter

Miller Tabak analyst David Joyce estimates that the overall industry saw slight video customer growth in the quarter.

NEW YORK - Telecom giant AT&T reported a net gain of 202,000 subscribers to its U-verse pay TV service on Thursday as it kicked off the latest quarterly earnings season for TV distributors. That was slightly below the year-ago addition of 209,000 customers, but in line with many Wall Street estimates.

The gain brought the company's overall U-verse TV subscriber base to 3.4 million as of June 30.

Sanford C. Bernstein analyst Craig Moffett said the quarterly TV net additions were "not far from consensus [expectations] of 199,000 in what is traditionally a seasonally soft quarter." Barclays Capital analyst James Ratcliffe also said the gains were in line with expectations.

Miller Tabak analyst David Joyce had predicted 220,000 TV user additions, but the actual result didn't make him change his predictions for overall pay TV subscriber growth in the latest quarter.

Joyce projects industry-wide net adds of 97,000 in the second quarter driven by gains for AT&T and Verizon (+170,000), as well as satellite TV firms DirecTV (+100,000) and Dish Network (+50,000). But he once again expects cable operators to post subscriber losses, which he estimates at 317,000 for publicly traded and 443,000 for privately held companies.

The user growth he expects would make for the third consecutive quarter of pay TV subscriber increases after two quarters of declines last year kicked off a debate over whether some consumers may be dropping their cable packages to substitute them with online video options.

On Wednesday, SNL Kagan predicted that online video will replace pay TV service in 4.5 million homes, or 4 percent of U.S. households, by year-end in the latest contribution to the cord cutting debate.

When including bundled satellite TV subscribers, AT&T added only 168,000 pay TV subscribers in the second quarter as analysts highlighted a loss of 34,000 users under satellite co-marketing deals.
AT&T's total video subscribers, including bundled satellite users, stood at 5.3 million at the end of June.

U-verse broadband Internet user additions amounted to 439,000 in the latest quarter, bringing the total to 4.1 million.

AT&T also reported iPhone activations remained strong at 3.6 million.

Management during a conference call said that they remain committed to AT&T's proposed acquisition of T-Mobile even though the clock on its regulatory review has been temporarily stopped.
Will the deal be approved in Washington? "We still believe the odds are "yes," by the way, notwithstanding the recommendation against approval that came from Senator and chairman of the Senate Judiciary Committee Herb Kohl (D-Wisc.) yesterday," Moffett wrote in a report.


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