The results, announced prior to US markets opening yesterday, confirmed similar strength across fibre broadband and HBO max subscriptions: fibre broadband net adds passed the one million mark for the year – the second consecutive year that has happened – while domestic HBO Max and HBO subscribers topped 41 million – nearly 61 million worldwide – "a full two years faster than our initial forecast," said CEO John Stankey.
Opening the earnings call yesterday, Stankey reflected on 2020 and the circumstances in which the results were achieved.
He said: "There are a lot of words to describe 2020 most of which won't be nice to say in public. But when I look at how we executed on our priorities in the midst of this pandemic, I keep coming back to one word, and that is resilience.
"We reduced churn, streamlined operations and had the nation's fastest wireless network.
"Our resilient portfolio of subscription businesses continue to generate strong cash flows, more than US$27 billion, to support our ability to invest in our growth areas and sustain the dividend."
Results for Q4 showed 800,000 post-paid phone net adds, 1.5 million for full year; and 1.2 million post-paid net adds, 2.2 million for the full year with Q4 churn of 0.76%, its second-lowest quarter ever, and full-year churn of 0.79%. Domestic wireless services saw six million additions.
The bottom line impact pushed related revenues up 7.6%, with service revenues up 0.5% and equipment revenues up 28.3%.
On broadband for Q4, there were 273,000 AT&T Fibre net adds – more than one million for the full year – and "solid IP broadband ARPU" growth of 4.6%.
However, Stankey maintained that the most "remarkable" achievement of the year was related to content. On that topic, he commented: "Perhaps most remarkable during this pandemic, we launched HBO Max and about seven months later we had about 41 million HBO Max and HBO domestic subscribers, two years ahead of the plan we shared in October 2019."
Financials
As much as the pandemic drove AT&Ts operational performance, it had a negative impact on the financials.
Consolidated revenues for the fourth quarter totalled $45.7 billion versus $46.8 billion in the same quarter the previous year. The pandemic impacted revenues "across most businesses", particularly WarnerMedia and domestic wireless service revenues, which were pressured from lower international roaming.
For the quarter, revenue declines included domestic video, Warner Bros. television and theatrical products, legacy wireline services, and Latin America, which includes foreign exchange pressure, although these were "partly offset" by higher domestic wireless revenues, primarily from equipment sales.
For full-year 2020 when compared with 2019 results, AT&T's consolidated revenues totalled $171.8 billion versus $181.2 billion. Again, the pandemic impacted revenues across all businesses.
Declines at WarnerMedia included lower content and advertising revenues, in part due to Covid-19.
Revenues also declined in domestic video, legacy wireline services and Latin America, which was also impacted by foreign exchange pressures.
Although HBO and HBO Max were highlighted several times for subscriber growth, the gains came at a cost.
Costs relating to launching and operating HBO Max pressured overall operating expenses for the full year, which reached $165.4 billion compared with $153.2 billion in 2019.
Non-cash asset impairments and abandonments were also contributing factors and "$17.4 billion higher than in 2019". Higher domestic wireless equipment costs, incremental Covid-19 costs, higher severance charges, and higher subscriber acquisition were all cited as contributing to the total.
These increases were "partially offset" by lower video and WarnerMedia costs from lower revenues, foreign exchange impacts on Latin America expenses, a one-time spectrum gain and cost efficiencies.
Meanwhile, operating income came in at $6.4 billion, down 77.1% on 2019 primarily due to higher asset impairments and abandonments "and Covid-19 impacts". The operating income margin was 3.7% versus 15.4%. With adjustments for both years, operating income was $34.1 billion versus $38.6 billion in 2019, and operating income margin was 19.8% versus 21.3%.
However, debt declined by $3.5 billion over the year, "a material reduction" Stankey said in the call.
In 2021, the company expects consolidated revenue growth in the 1% range, stable adjusted EPS, and gross capital investment "in the $21 billion range with capital expenditures in the $18 billion range".
