AT&T chief Randall Stephenson (pictured) argued the company is well positioned to be successful as the lines between entertainment and communications blur, while also talking up the strength of its Mobility unit.
In an analyst meeting, Stephenson said: “If you’re a media company, you can no longer rely exclusively on wholesale distribution models. You must develop a direct relationship with your viewers. And if you’re a communications company, you can no longer rely exclusively on oversized bundles of content.”
“We have some of the world’s best content and 370 million direct-to-consumer relationships across mobility, video, broadband and our digital properties. That exceptional combination enables us to deliver a broad spectrum of entertainment experiences, from premium video to skinnier over-the-top and mobile-centric bundles of live content, and a subscription video-on-demand product” due to launch in late 2019.
The AT&T CEO said “this is a business that is driven by mobility. Our revenue and our earnings are really driven by this business”. The unit accounts for almost half of AT&T’s adjusted EBITDA and around 40 per cent of revenue: growth in both is expected to continue in 2019.
In a statement, AT&T said it “expects its leadership in 5G and its FirstNet deployment will sustain this growth”.
Stephenson said AT&T’s interaction with the US regarding its Time Warner acquisition had “caused us to put on hold a number of plans”.
“Typically as we go through a merger review we’re doing merger planning and so forth, to come out of the gate executing on merger plans. With this one, we had to put all that effort on pause.”
The business, now known as WarnerMedia, represents around 17 per cent of the company’s revenue and adjusted EBITDA. AT&T said the unit “is well positioned with its existing wholesale distribution of content, combined with its plans for a subscription video-on-demand (SVOD) service next year and potentially an advertising-supported video-on-demand service in the future”.
Stephenson acknowledged that for AT&T’s entertainment unit, “this is an entity that admittedly has struggled this year”.
“We’ve been investing a lot here, we’ve been building out a fibre footprint: I would suggest the fibre project over the last two or three years has been probably one of the most aggressive in the United States. We’ve also been investing very aggressively in our over-the-top streaming platform. And 2018 has been all about getting that product and the pricing, the customer value proposition, and the cost, the content cost dynamics, right.”
The company said it is seeing increased profitability from OTT video, through price increases, lower content costs and adjustments to promotion, although this is likely to take its toll on Q4 subscriber numbers.
Stephenson also said CFO John Stephens is working on “a number of initiatives” to cut debt, including asset sales.