The world’s largest telecom rang in the new year with fourth-quarter revenue that fell slightly short of expectations and earnings per share that met them, but all eyes are still on its pending $85 billion merger with Time Warner Inc.
For the three months ending Dec. 31, AT&T reported revenues of $41.8 billion and earnings of 66 cents a share. That compares with the $42.1 billion in revenue and earnings of 63 cents a share the company pulled in during the corresponding period last year. AT&T also fell short of analyst estimates of $42 billion in revenue and in line with the 66 cents a share in earnings analysts predicted.
Calling 2016 “a transformational year,” AT&T Chairman and CEO Randall Stephenson touted milestones such as the company’s “5G evolution plans and improved spectrum position” in the mobile space, the launch of streaming service DirecTV Now, and the Time Warner acquisition deal.
AT&T agreed to acquire Time Warner for $85 billion in October, which would unite a content and distribution empire including the Warner Bros. studio, CNN, HBO, DirecTV and AT&T Wireless under one roof. Also in the fourth quarter, AT&T introduced its over-the-top streaming service, DirecTV Now, which the company said has already topped 200,000 subscribers in a Jan. 20 filing.
The telecom giant also showed strong growth in its wireless business, which has become an increasingly popular way for consumers to watch video content — which AT&T could have a lot more of if the Time Warner deal is approved. AT&T added 2.8 million wireless subscribers during the fourth quarter, with 1.3 million of those in Mexico. AT&T also added 235,000 subscribers to its flagship pay-TV service, DirecTV, during the fourth quarter even as it caters to cord-cutters with DirecTV Now.
CNN has been a favorite punching bag of President Donald Trump, as he has repeatedly blasted the network as “fake news,” leading some observers to question whether his grudge against CNN could endanger the deal. However, Stephenson met with Trump days before his inauguration and seemed fairly certain the change in the White House wouldn’t affect the merger.
“I feel very confident the deal gets done,” he told CNBC on Jan. 17. “This is a vertical merger. The competitive environment in telecommunications does not change after this closes. The competitive environment in the media entertainment business does not change.”
While AT&T does not plan to transfer any of Time Warner’s broadcast licenses to itself as part of the deal, allowing it to avoid a Federal Communications Commission review, the proposed merger still must receive Justice Department approval. The FCC would have had to determine whether the merger was in the public interest, something some legislators still want answered.
Earlier Wednesday, a group of 13 senators including presidential candidate Bernie Sanders (I-Vt.) and potential 2020 hopefuls Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.) signed a letter addressed to Stephenson and Time Warner CEO Jeff Bewkes requesting a “public interest statement detailing how you plan to ensure that the transaction benefits consumers, promotes competition, remedies all potential harms, and further serves the public interest through the broader policy goals of the Communications Act.”
“While we appreciate your testifying before the Senate Judiciary Committee in December of last year, we remain concerned about how a deal of this size could affect consumers and competition,” the senators wrote. “AT&T is already the world’s largest pay TV provider and the largest telecommunications company. Combining it with one of the world’s largest producers of content gives AT&T-Time Warner both the incentive and ability to use its platform to harm competitors, and as a result, consumers.”
AT&T will hold a conference call to discuss the earnings at 4:30 p.m. ET.