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WarnerMedia revenue falls in Q3; AT&T forecasts HBO Max to add 50M subscribers

AT&T’s third quarter earnings reported a dip in revenue at subsidiary WarnerMedia, falling from US$8.4 billion in Q2 to $7.8 billion in Q3 while HBO revenues soared to $1.8 billion. The ...
October 28, 2019

AT&T’s third quarter earnings reported a dip in revenue at subsidiary WarnerMedia, falling from US$8.4 billion in Q2 to $7.8 billion in Q3 while HBO revenues soared to $1.8 billion.

The telecom giant released its three-year financial outlook and capital allocation plan Monday (Oct. 28) with plans to ramp up investment in WarnerMedia-owned streamer HBO Max, expected to launch in spring 2020.

AT&T chairman and CEO Randall Stephenson (pictured) forecasts the SVOD will add 50 million subscribers over the next five years.

“The field, in terms of where we intend to play, is not that crowded… We’re starting with a product called HBO, which has a very significant position in the marketplace,” Stephenson said in the company’s quarterly earnings call. “This is not Netflix, this is not Disney. This is HBO Max.”

AT&T’s three-year plan is expected to drive growth and allow the company to invest in growth areas, retire shares and continue to pay down debt.

As part of its debt reduction strategy, the telcom struck a deal Sunday (Oct. 27) to sell Central European Media Enterprises, which it acquired in 2018, to Czech investment firm PPF Group. AT&T will receive around US$1.1 billion in cash at close and will also be relieved of a $575 million debt guarantee.

In 2020, the company expects to monetize $5 billion to $10 billion of non-strategic assets.

AT&T’s consolidated revenues for the third quarter totaled $44.6 billion, compared to $45.7 billion in the year ago quarter. Net income attributable to the company was $3.7 billion, or 0.50 per diluted share, compared to $4.7 billion in the year-ago quarter.

WarnerMedia revenues were down 4.4% year over year (YOY). The mass media giant’s brands include HBO, Warner Bros., Turner and Otter Media, to name a few.

At HBO, revenues were up 10.6% YOY, reflecting an increase in content and other revenues and a 1.1% bump in subscription revenues. Turner revenue landed at $3 billion, up 0.6% YOY, while Warner Bros. revenue fell to $3.3 billion, down 10.4% YOY.

Financial results for Otter Media, which AT&T acquired in August 2018, were included in WarnerMedia’s consolidated results.

AT&T forecasts adjusted earnings per share in the $3.60 to $3.70 range in 2020, which includes HBO Max investment of about $0.15 to $0.20 per share in 2020.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” Stephenson said in a statement. “Our three-year plan delivers both substantial and consistent financial improvements over the next three years. We grow revenues, EBITDA and EPS every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well. And all of this is inclusive of our investment in HBO Max.”

Stephenson will remain as CEO through 2020.

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