AT&T posted subscriber gains across its wireless segment in Q2, but the operator’s attention was firmly focused on the future of entertainment in the wake of its recent merger with content giant Time Warner.
With the merger closed, John Stankey, head of AT&T’s new WarnerMedia division, said the “race is on” to scale its content-consuming customer base. “We want to be generating audiences in the tens of millions, not in the single digits of millions,” he said.
To do that, AT&T said it is planning to capitalise on its direct-to-consumer relationships with 170 million existing customers across its wireless, broadband and pay-TV segments. Executives said that strategy will not only help reduce churn through bundling offers, but also drive more traffic to its network which will yield more data that can be used for AT&T’s targeted ad business.
The operator kicked its bundling strategy into gear with the debut of its mobile-oriented DirecTV Now service in November 2016. But AT&T Communications chief John Donovan said DirecTV Now was a “placeholder in the market” until its Time Warner deal was finished, adding AT&T plans to shake up its bundle line up in the future to provide different offers that meet various budgets and levels of customer engagement with content.
Donovan said the operator has already seen significant strength in bundling video with its wireless products, as that combination, in addition to boosting average revenue per user (ARPU) and reducing churn, offers a way to differentiate its products while also providing value to consumers. The goal, he said, is to replicate its success bundling DirecTV assets with Time Warner content.
“Basic things that video does, like drive traffic and hours of consumption, become assets for us to acquire value and ARPU and retain customers. And we really are hitting our stride in how to move those currencies across franchises. So, we’re really thrilled about what this can do for broadband and for mobility,” he concluded.
While AT&T added 74,000 postpaid subscribers, its prepaid segment proved to be the Q2 star with 453,000 prepaid subscriber additions, a figure that was up from 267,000 prepaid additions in Q2 2017.
The operator noted its Cricket Wireless prepaid brand surpassed the 9 million subscriber milestone in the quarter, marking the doubling of its subscriber base in four years.
AT&T also added 342,000 DirecTV Now subscribers, for a total of 1.8 million customers on the service.
Wireless revenue of $17.3 billion was down slightly from $17.46 billion in Q2 2017, as service revenue dipped to $13.7 billion from $14.5 billion the year prior. Equipment revenue of $3.6 billion was up from nearly $3 billion in the same period a year ago.
Revenue from AT&T’s Entertainment segment, which includes its broadband and pay-TV services, was down to $8.4 billion from nearly $9.2 billion in Q2 2017.
Consolidated revenue of $39 billion was down slightly from $39.8 billion the year prior, a dip AT&T chalked up primarily to accounting changes. Net profit in Q2 was $5.1 billion compared to $3.9 billion in the year-ago quarter.