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AT&T Delivers Strong Q2 Earnings Ahead of Time Warner Takeover

Telecom giant’s $85 billion deal is expected to close by the end of the year

A growing and profitable wireless business helped telecom giant AT&T reported strong second-quarter earnings Tuesday as Wall Street remains focused on its pending $85 billion deal to acquire Time Warner, which AT&T Chairman and CEO Randall Stephenson reiterated he expects will close by year-end.

AT&T reported revenue of $39.8 billion and earnings of 79 cents a share for the three months ended June 30. That compares with the $40.5 billion in revenue and earnings of 72 cents a share the telecom giant earned in the corresponding period last year. Analysts had expected the company to report revenue of $39.8 billion and earnings of 74 cents a share.

“Once again our team delivered expanded consolidated margins and, as a result, grew adjusted earnings per share by nearly 10 percent as we executed well against our business priorities,” Stephenson said in a statement. “And in a quarter where our competitors used promotions aggressively, we added more than 500,000 branded smartphones to our base and more than 100,000 IP broadband subscribers, achieved record EBITDA wireless margins and had the lowest postpaid phone churn in our history. We continue to expect the Time Warner deal to close by year-end and further transform the company.”

AT&T was boosted by 2.8 million wireless net adds, and a best-ever 50 percent margin on its wireless service. Its international revenues rose 10.8 percent, with Mexico largely leading the way.

In October, AT&T agreed to acquire Time Warner for $85 billion, which would create a content and distribution colossus that includes such diverse assets as the Warner Bros. studio, CNN, HBO, TNT, DirecTV and AT&T Wireless. But that monster deal still has to go through government approval under an unpredictable Trump administration.

Earlier this week, Bloomberg reported that AT&T and Time Warner executives have started conversations with antitrust regulators about conditions that could pave the way for the deal to get its final approval from the Justice Department. While the Trump administration has taken a generally pro-business approach — and Stephenson has met with the president — Trump has repeatedly bashed Time Warner cable channel CNN as “fake news,” which could throw a wrench into the proceedings. However, Stephenson said in April that he expects the transaction to close by year-end, and repeated that guidance Tuesday.

And while cord-cutting is taking a toll on pay-TV providers like AT&T’s DirecTV — cable subscribers dropped by 800,000 in the first quarter of this year — the company continues to push its streaming live TV service, DirecTV Now.

The streaming platform added 200,000 subscribers during its first full month last December, but growth flatlined after that, as technical issues and a deliberate pullback of marketing contributed to that. AT&T has recently turned the promotional firehose back on, offering discounts to Best Buy customers and giving new subscribers a Roku Premiere streaming device with two months of service prepaid. In its earnings release, AT&T acknowledged shedding 199,000 video subscribers, but said DirecTV Now growth helped mitigate those losses. DirecTV Now added 152,000 subscribers during the second quarter — more than twice as many as in the previous three months — to reach nearly half a million overall.

AT&T’s stock is up nearly 3 percent in after-hours trading. The company will hold a conference call to discuss the earnings at 4:30 p.m. ET.

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