Technology

AT&T tops profit estimates as DirecTV deal nears completion

With DirecTV, AT&T would become the top U.S. pay TV provider and expand its business beyond the increasingly saturated wireless industry.
With DirecTV, AT&T would become the top U.S. pay TV provider and expand its business beyond the increasingly saturated wireless industry. The Associated Press

AT&T topped analysts’ profit estimates as gains in tablet customers cushioned the loss of phone subscribers while the company awaits regulatory approval of its $48.5 billion acquisition of DirecTV.

Second-quarter earnings excluding some items were 69 cents a share, Dallas-based AT&T said. That exceeded the 64-cent average of estimates compiled by Bloomberg.

With DirecTV, AT&T would become the top U.S. pay TV provider and expand its business beyond the increasingly saturated wireless industry. No. 3 and 4 wireless carriers Sprint and T-Mobile US have been fighting for subscribers with price cuts, phone rentals and free music streaming, forcing AT&T and Verizon Communications to respond.

“Investors can now look ahead to the benefits of the DirecTV deal,” said Kevin Roe, an analyst with Roe Equity Research.

The earnings came out after the market closes, and AT&T, the second-largest U.S. wireless carrier, rose more that 2.5 percent in after-hours trading. The shares closed regular trading down 1 percent at $33.93 in New York. The stock has gained 1 percent this year.

The company added a total of 410,000 monthly subscribers, short of the 460,000 average of seven analysts surveyed by Bloomberg. While the company lost more than 200,000 phone subscribers, it more than made up for it with 600,000 new tablet users. Analysts projected a loss of 117,000 phone customers and a gain of 552,000 tablet subscribers.

Revenue rose to $33 billion, in line with projections. The average user’s monthly bill was $61.26, exceeding the $57.96 average of estimates, though lower than the $62.28 brought in a year earlier.

AT&T, which for years has lagged behind Verizon in revenue growth, is starting to pull ahead. Analysts predict AT&T will have a 3 to 4 percent increase in sales growth over the next two years, compared with a maximum of 1 percent estimated for Verizon, according to estimates compiled by Bloomberg.

Verizon, AT&T’s biggest competitor, has kept its focus on mobile, including a new video service coming later this summer, and advertising through its $4.4 billion acquisition of AOL. Meanwhile, AT&T will add a new service to its product bundle and push even further into Latin America with DirecTV.

AT&T has said that soon after it closes the DirecTV deal it will give analysts and investors an outlook for the newly combined company.

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