AT&T Sees Improved Video Performance, Easy Switch to 5G, CEO Says

The many virtual MVPD introductions last year, including AT&T's DirecTV Now and rival services from Hulu and YouTube, were to blame for an accelerated drop-off in AT&T's video subscriber base, CEO Randall Stephenson said at an investor conference. He said the decline rate should be more typical this year, as pricing is being rationalized between virtual MVPDs and the traditional market. He said between DirecTV and DirecTV Now, AT&T has about the same 25 million subscriber base that the company had when it bought DirecTV, and the introduction last week of its WatchTV skinny bundle streaming service (see 1806210037) could help further increase video subs. Stephenson said AT&T's aim with its Time Warner buy was "a modern media company" that has premium content, high-speed network capabilities, advertising technology and direct-to-consumer relationships. "The days of wholesaling content [via MVPDs] isn't a sustainable business model anymore," he said. AT&T plans within 24 months to build a real-time exchange for premium video ad content that it envisions outside parties also taking part in, he said (summary here). Chief Financial Officer John Stephens said AT&T anticipates getting back to "more normal historical levels" of debt by 2023. The executives said Thursday the move to 5G for AT&T will be akin to a software upgrade and not require extensive capital spending because of investments the company already is making, with the carrier equipping cellsites for 5G as part of the FirstNet rollout. Stephens said its fiber network now reaches about 9 million locations and should reach 14 million by this time next year. The company said its FirstNet buildout should be halfway completed within a year. American Enterprise Institute visiting scholar Mark Jamison blogged Friday that vertical mergers like AT&T/TW are motivated by network operators' huge capital spending in recent years and that they're facing having to do more for 5G. He said with network firms borrowing to finance expansion, while downstream firms generate cash off those networks, vertical mergers let network operators access that cash, leading to better innovation and company finances.