AT&T Q4 2020: Consumers flock to HBO Max, but COVID recovery is far from reality

Wonder Woman 1984 helped bring in subscribers, but that’s not enough to offset COVID-19.

AT&T has reported Q4 2020 earnings shored up by an expanding subscriber base, but COVID-19 is still disrupting the company's operations and leaving an indelible mark on the books. 

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

AT&T reported consolidated revenues of $45.7 billion and a net loss attributable to common stock of $13.9 billion or -$1.95 per share. Adjusted EPS earnings are $0.75 per share including "asset impairments, an actuarial loss on benefit plans, merger-amortization costs and other items."

"The company did not adjust for COVID-19 impacts of ($0.08): $0.01 incremental cost reductions and ($0.09) of estimated revenues," AT&T added.

AT&T's third-quarter earnings were $0.39 per share (adjusted EPS $0.76) on revenues of $42.3 billion. 

However, the firm continues to enjoy subscriber growth. Over Q4 2020, 800,000 postpaid phone net adds, 1.2 million postpaid net adds, close to six million total domestic wireless net adds, and 273,000 AT&T Fiber net adds were reported. AT&T said that it experienced a 617,000 net loss over the quarter when it comes to premium TV services.

Total domestic and international HBO and HBO Max subscribers have now reached 41 million and close to 61 million, respectively. HBO Max activations alone accounted for 17.2 million subscribers as of the end of the quarter.

Operating loss was reported as $10.7 billion in comparison to $5.3 billion last quarter. AT&T says "non-cash asset impairments in the quarter and the impact of lower revenues" have contributed to this figure.

When adjusted for non-cash asset impairments, operating income was $7.8 billion in comparison to $9.2 billion in Q4 2019. AT&T's latest reported operating income margin was 17.1%.

Free cash flow is now pegged at $7.7 billion. Net debt declined by $1.6 billion.

For the full 2020 financial year, AT&T revenue totaled $171.8 billion, a drop from $181.2 billion in 2019. 

"The COVID-19 pandemic impacted revenues across all businesses, particularly WarnerMedia and domestic wireless service revenues, which were pressured from lower international roaming," the company says. "Declines at WarnerMedia included lower content and advertising revenues, in part due to COVID-19."

Revenues in domestic TV services and legacy wireline solutions decline, but sales in domestic wireless equipment and both strategic and managed services "partly offset" these losses, according to AT&T. 

Operating expenses over the year were $165.4 billion (2019: $153.2 billion), operating income in 2020 was $6.4 billion, down 77.1% year-over-year -- but with adjustments, operating income for FY 2020 is recorded as $34.1 billion versus $38.6 billion in FY 2019.

Net loss over 2020 attributable to common stock is $5.4 billion, or $0.75 per share. 

In 2021, AT&T expects a free cash flow of at least $26 billion, as well as a full-year dividend payout ratio in the 50%'s. Consolidated revenue growth is expected to be in the range of one percent and gross capital investment is pegged at roughly $21 billion, with $18 billion in capital expenditure. 

"We ended the year with strong momentum in our market focus areas of broadband connectivity and software-based entertainment," said John Stankey, AT&T CEO. "By investing in our high-quality wireless customer base, we had our best full-year of postpaid phone net adds in a decade and our second lowest postpaid phone churn ever. Our fiber broadband net adds passed the one million mark for the year. And the release of Wonder Woman 1984 helped drive our domestic HBO Max and HBO subscribers to more than 41 million, a full two years faster than our initial forecast."

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