AT&T Adds Wireless Customers, HBO Subscribers in Final Earnings as a Media Giant

“The customer response in the industry was stronger than we expected,” said Jeff McElfresh, chief of the company’s communications business, referring to the wireless market. “It’s a positive sign that the industry is healthy.”

The period was AT&T’s final quarter in charge of an entertainment business spanning CNN, HBO and the Warner Bros. studios, which it spun off last week into a new media company combined with competitor Discovery Inc. AT&T had acquired the media business in 2018 before the company decided to unwind the transaction and cut its dividend.

The entertainment company’s HBO unit posted a gain of three million subscribers in the March quarter and ended the period with 76.8 million subscribers, including 48.6 million in the U.S. Those tallies suggested that its HBO Max service still had room to grow in a market that pushed rival Netflix Inc. to its first quarterly customer decline in more than a decade. Netflix’s older streaming-video service has 222 million subscribers world-wide.

Growth from both segments—cellular service and show business—came at a cost. The company invested heavily in media production, smartphone promotions and network upgrades to support its next-generation wireless service, squeezing overall earnings. The media division’s operating income fell 33% to $1.32 billion, a figure the company attributed to higher marketing and programming costs for HBO Max and its new CNN+ streaming news service. The company also flagged the upfront cost of shutting down its 3G wireless network to make room for newer fifth-generation technology.

AT&T’s reported profit fell to $4.81 billion from $7.55 billion a year earlier, a decline to 65 cents from $1.02 on a per-share basis that reflected business lines no longer part of the slimmed-down telecom company. Excluding its now-divested media and advertising businesses, the DirecTV interest it dropped in late 2021 and other one-time expenses, the remaining company’s core earnings rose to 63 cents from 58 cents a year earlier.

During the quarter, revenue from the phone-and-internet operations that remain with AT&T rose 2.5% to $29.7 billion, fueled by wireless growth. Wireless-service margins still fell to 53.7% from 57.4% a year earlier as the cellphone carrier offered discounts to attract new subscribers and retain existing ones.

The company also reported higher revenue in its Mexican wireless business and in its U.S. consumer wireline segment, which added 289,000 fiber-optic internet customers. Declining sales from its business wireline unit eclipsed those gains, however. Its revenue fell 6.7% to $5.64 billion.

Shares climbed 1.4% to $19.70 premarket. The stock price was adjusted this month to reflect the media spinoff that gave AT&T shareholders a 71% stake in the new Warner Bros. Discovery, leaving a smaller telecom enterprise in its wake.

Write to Drew FitzGerald at [email protected]