AT&T tops earnings expectation as wireless churn matches record low

AT&T Inc. topped expectations with its latest financial results as the telecommunications giant continued to see low customer churn in its wireless business as well as subscriber growth for the HBO Max service.

Shares are up 1.4% in premarket trading.

The company reported second-quarter net income of $1.5 billion, or 21 cents a share, compared with $1.2 billion, or 17 cents a share, a year earlier. After adjusting for non-cash impairments, merger-amortization costs, and other expenses, AT&T
earned 89 cents a share, up from 83 cents a share a year prior and ahead of the FactSet consensus, which called for 79 cents a share.

AT&T generated quarterly revenue of $44.05 billion, up from $40.95 billion a year earlier, whereas analysts tracked by FactSet were projecting $42.68 billion.

“For the fourth consecutive quarter, we saw good subscriber growth across wireless, fiber and HBO Max,” Chief Executive John Stankey said in a release.

AT&T saw postpaid phone churn of 0.69%, matching its lowest rate on record, amid low switching activity in the wireless industry. The company reported 789,000 postpaid phone net additions in the quarter as overall revenue for the mobility segment rose 5% to $18.9 billion due to higher equipment and service revenues.

The company’s WarnerMedia business generated $8.8 billion in revenue, up 30.7% from a year earlier, as AT&T saw a “partial recovery” from some pandemic-driven impacts. The base of domestic HBO Max and HBO subscribers reached 47.0 million at the end of the quarter, compared with 44.2 million as of the end of the first quarter.

See also: AT&T’s $43 billion deal with Discovery will help it reduce debt ahead of costly 5G build-out

AT&T now expects consolidated revenue growth of 2% to 3% over the course of 2021 as well as adjusted earnings-per-share growth in the low- to mid-single digits, when excluding the impact of its pending deal to make DirecTV a separate business, with TPG Capital taking a 30% stake. The company previously called for consolidated revenue growth of about 1% and stable adjusted EPS relative to the year prior.

The company anticipates that the DirecTV deal will close in the next few weeks. The closing “will impact certain aspects of guidance,” AT&T said in its release. “Assuming that time frame, the expected impact of the deal on the remainder of 2021” is for revenues to be lower by $9 billion.

Shares of AT&T have lost 7.3% over the past three months as the S&P 500
has risen 4.4%.