AT&T Inc. (NYSE:T) has indicated that it booked a $15.5 billion charge on the struggling DirectTV business, which has suffered due to the increase in cord-cutting despite the company’s streaming Service HBO Max growing considerably.
DirecTV continues to struggle as cord-cutting increases
The company said that this hefty write-down spurred a Q4 loss as the telecom giant signaled that its focus will be on streaming and a shift from traditional pay-TV. In the quarter AT&T reported a revenue decline for DirectTV and WarnerMedia businesses, which offset the growth of the core wireless phone unit.
AT&T officials called noncash accounting charge a sign of DirecTV’s aging status as the company focuses on an internet-streaming model, which gives the content production unit a direct line to consumers. Over the past year, AT&T has been trying to unload the DirecTV business, but it has not received the right offer. Recently, the company engaged private-equity firm TPG, regarding the sale of the business for $15 billion. The latest Q4 write-down is a reflection of how the business has fallen since its acquisition in 2015 for around $49 billion.
AT&T’s video unit revenue dropped 11% in Q4
Notably, in Q4, the company’s video unit revenue which includes DirecTV dropped 11% to $7 billion. AT&T TV and DirecTV lost 617,000 subscribers in Q4 and ended the year with around 17 million video connections domestically which are a 16% YoY drop. Overall, the company posted a loss of $13.89 billion or $1.95 per share with revenue dropping 2.4% to around $45.7 billion.
John Stankey, AT&T’s CEO, said that currently the company’s biggest and surest bet is the HBO Max unit. The company is planning to expand the service to other countries later this year as well as launch an ad-supported version of the service in Q2 2021.
Despite traditional TV experiencing challenges, the wireless business on the other hand has been flourishing. The wireless unit generates over half of AT&T’s profits and has been a bright spot having gained 800,000 paying subscribers in Q4 and 1.5 million subscribers for the whole year.