AT&T Q3 2020: strong subscriber growth, but COVID-19 impact remains

The telecoms giant is gradually reducing debt and has increased its cash flow predictions for 2020.
Written by Charlie Osborne, Contributing Writer

AT&T has reported Q3 2020 earnings driven by an increasing subscriber base for premium services, but the current pandemic has still had a material impact on the balance sheet. 

On Thursday, the Dallas, Texas-based telecoms giant published its third-quarter financial results (statement) (.PDF).

AT&T reported revenues of $42.3 billion, or $0.39 diluted earnings per share (EPS). Adjusted EPS earnings were $0.76 per share.

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Analysts expected $0.76 earnings per share on sales of $41.61 billion. The consensus EPS estimate was $0.77. 

The company's second-quarter earnings were $0.17 per share (adjusted EPS $0.83) on revenues of $41 billion. 

EPS has continued to suffer this year due to COVID-19. AT&T says that the impact of the pandemic is down $0.21; $0.02 associated with business costs and $0.19 due to "estimated revenue impacts."

However, subscriber growth continues to climb. AT&T said that over Q3 2020, 5.5 million net adds were recorded. In total, over one million postpaid net additions -- including 645,000 postpaid phones -- 245,000 prepaid net adds, 357,000 fiber net additions, and 158,000 total broadband net additions were added. 

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5G rollout efforts and premium services -- such as AT&T Unlimited Elite with HBO Max and FirstNet -- are considered as drivers for this growth, while service revenues declined by 0.3% as fewer of us are now traveling and require roaming contracts or subscriptions. 

Total domestic and international HBO and HBO Max subscribers have now topped 38 million and 57 million, respectively. 

Operating expenses were $36.2 billion, a reduction from Q3 2019's operational expenses of $36.7 billion. Operational income was reported as $6.1 billion in comparison to $7.9 billion last quarter, a figure AT&T says has been impacted by COVID-19-associated disruption and costs. 

Free cash flow is now pegged at $8.3 billion. Net debt declined by $2.9 billion.

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The company has also adjusted its annual outlook. Over FY 2020, AT&T expects a free cash flow of at least $26 billion, as well as gross capital investment in the $20 billion range, with a focus on expanding and improving fiber, 5G, FirstNet, and HBO Max. 

"We delivered a solid quarter with good subscriber momentum in our market focus areas of connectivity and software-based entertainment," said John Stankey, AT&T CEO. "Wireless postpaid growth was the strongest that it's been in years with one million net additions, including 645,000 phones. We added more than 350,000 fiber broadband customers and are on track to grow our fiber base by more than 25% this year. And we continue to grow and scale HBO Max, with total domestic HBO and HBO Max subscribers topping 38 million well ahead of our expectations for the full year."


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