AT&T Inc. said 338,000 regular mobile-phone subscribers stopped paying for their service due to the Covid-19 crisis, which is the first time a U.S. mobile-phone company has disclosed how many people are skipping bills under financial duress from the pandemic.
The company said an additional 159,000 broadband customers and 91,000 TV subscribers have also stopped payments due to Covid-19 in the second quarter. AT&T and other carriers have vowed not to shut off service to people affected by the viral crisis.
“We’re actively contacting, working with and trying to retain these customers and certainly, we haven’t given up on them and they haven’t given up on us,” Chief Executive Officer John Stankey said on an earnings call Thursday.
The nonpaying customers and subscriber declines, which also continued in AT&T’s wireless and DirecTV video service, applied further pressure to the company’s cash position as it tries to maintain a generous dividend.
Due to the uncertainty surrounding Covid-19, AT&T could only provide limited guidance, saying that the dividend-to-free-cash-flow ratio would be at the low end of the 60s percentage range it had previously targeted. And capital spending for the year will be about $20 billion, compared with $19.6 billion in 2019.
The company pays about $14 billion to $15 billion in dividends annually. Last year, AT&T’s dividend-to-free-cash-flow ratio was 51.3%. The lower the percentage, the more cash the company has at its disposal for other uses.
AT&T lost 886,000 TV customers and 154,000 regular monthly wireless subscribers, including phone, watch and tablet users. That was better than analysts’ predictions for a loss of 939,000 TV subscribers and 210,000 wireless defections.
HBO Max, the premium streaming service AT&T launched in May, now has 36 million subscribers. That matches the company’s forecast to have 36 million subscribers in the first year, though AT&T didn’t say how many of the subscribers had been existing HBO viewers who converted at the same $15 monthly price. The video service is key to the company’s entertainment strategy, along with the Warner Bros. film studio. AT&T expects to have 50 million HBO Max subscribers by 2025.
The Dallas-based communications and media giant posted adjusted earnings of 83 cents a share on $40.95 billion in quarterly revenue, topping estimates for earnings of 79 cents on $40.94 billion in sales. The effects of the coronavirus pandemic cut about 9 cents from the company’s adjusted EPS and reduced revenue by $2.8 billion, the company said.
AT&T shares were down 1.6% to $29.68 at 9:52 a.m. in New York. The stock is down 24% this year, compared with a 9.2% fall for Verizon Communications Inc. and a 34% rise for T-Mobile US Inc.
Original: Scott Moritz – BLOOMBERG