HAMPTON, N.H. – The success of DirecTV Now enables AT&T to return to postpaid phone and video net additions in 4Q17, according to data released in the telecommunication’s latest earnings report earlier this week
Despite heighted competition arising from the converging mobile and video industries, AT&T (NYSE: T) was able to generate postpaid phone (+329,000) and total domestic video (+161,000) net additions for the first quarters since 3Q14 and 1Q15, respectively. AT&T’s improved subscriber performance highlights the value proposition of its DirecTV Now mobile bundles as well as their success in combatting competitive pressures, including T-Mobile and Sprint beginning to offer free access to Netflix and Hulu, respectively.
AT&T’s strategies will also help the carrier cement its subscriber base as the company will face heightened competition from new MVNO mobile video bundles from cable providers such as Comcast, Charter and Altice as well as new OTT services that will launch in 2018 including T-Mobile’s upcoming video platform.
AT&T’s FirstNet contract will also bolster Mobility subscriber additions in 2018 as the network will serve as a strong differentiator initially to attract first responders and will garner connections from mission-critical IoT applications such as wearables and telemetry solutions. AT&T will face competition in the long term, however, as Verizon’s rival public-safety network is set to launch in 2018.
Despite AT&T returning to postpaid phone subscriber growth, it was unable to increase wireless service revenue (-2.5% YTY) as postpaid phone ARPU decreased 2.6% year-to-year in 4Q17 due to customers migrating to discounted non-subsidy service plans as well as lower overage revenue stemming from adoption of unlimited data plans.
Additionally, AT&T’s Video Entertainment revenue (-2.2% YTY) declined for the first quarter since the close of the DirecTV acquisition due to the impact of AT&T trading its linear U-verse TV and DirecTV satellite subscribers for DirecTV Now customers, which generate significantly lower ARPU.
AT&T will become the first U.S. carrier to offer commercial 5G mobile services, though revenue generation opportunities will be limited initially
Though AT&T will gain bragging rights by providing 5G mobile access before rivals by launching commercial services in a dozen markets by the end of 2018, the appeal of the technology will be limited initially as 5G-compatible devices are not expected to be available until 2019. Additionally, IoT use cases that will require 5G connectivity, such as autonomous driving and advanced healthcare solutions, will not be prevalent for at least another several years.
The greatest initial benefit AT&T will realize from its early adoption of mobile 5G will be improved cost efficiencies. According to TBR’s 1Q18 5G Telecom Market Landscape, though LTE is more than sufficient to support current use cases for the network, 5G offers greater performance and cost efficiencies, and will enable operators to lay a foundational network architecture to support new business models that may arise.
Though 5G is unlikely to drive significant new revenue streams for operators until the early 2020s, the early majority of adopters will justify the investment in 5G for the efficiencies the technology provides.
(C) TBR
