Business diversifications of such scale as AT&T performed recently happen rarely, for the simple reason that the scope of the new venture is as significant as the company’s core operations. From next year, the telecommunications firm will double as a direct-to-consumer streaming provider with some of the most sought-after video content, taking advantage of the growing prevalence of cord-cutting.
When the management presents its strategy after publishing the third-quarter results Wednesday before the opening bell, the market will be looking for comments on the new service. It is estimated that the telecom conglomerate generated earnings of $0.93 per share on revenues of $45.63 billion in its third quarter, representing a 26% and 15% growth respectively compared to last year.
The change in business strategy comes at a time when the company is struggling to sustain its subscriber base amid continuing user drift to less costly services, especially customers of the wireless postpaid service. Meanwhile, it is poised to benefit from the positive cash flow scenario, despite heavy capital outflow and high debt. Considering the inconsistency associated with AT&T’s financial performance in recent years, the upcoming earnings report will be closely scrutinized.
When the management presents its strategy at the conference call, the market will be looking for comments on the new video-on-demand service
For the second quarter, the Dallas, Texas-based company posted a 29% growth in earnings to $0.81 per share, despite a 2% decline in revenues hurt by domestic video and the legacy wire-line services, which offset growth in the wireless and entertainment segments. The bottom line came in above analysts’ expectations.
Earlier this month, the management rolled video-on-demand service in a move aimed at monetizing the recently acquired assets of Time Warner effectively, especially the original content of the HBO network. The service, which is expected to reach the American households by the end of 2019, could give leading video streamers like Netflix (NFLX) a run for their money.
Also see: AT&T Q2 2018 earnings conference call transcript
Among AT&T’s peers, Verizon (VZ) is scheduled to publish its third-quarter results Tuesday – the first quarterly report after new CEO Hans Vestberg took office. Verizon’s earnings are forecast to grow 19% to $1.14 per share on revenues of $31.50 billion.
AT&T stock traded higher in the early hours of Monday, after closing the previous session higher. The stock has dropped about 3% over the past twelve months and 14% since the beginning of the year.