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AT&T Misses Call on Q1 Revenue, Earnings Meet Expectations

Company is preparing to acquire Time Warner

America’s biggest and oldest telecom company kicked off 2017 with earnings in line with expectations, but investors are still waiting on the line for its $85 billion purchase of Time Warner to go through.

AT&T reported revenue of $39.4 billion and earnings of 74 cents a share for the three months ended March 31, falling short of the $40.5 billion in revenue, but beating the 72 cents a share in earnings the telecom giant earned in the corresponding period last year. Earnings were in line with analyst estimates of 74 cents a share, while AT&T fell short of the $40.5 billion in revenue analysts expected.

AT&T chalked up a big part of the revenue miss to its phone business, saying it was “primarily due to record-low equipment sales in wireless” in a statement accompanying the earnings.

“In a very competitive quarter, we continued to execute on our goals of driving efficiencies in our business while growing adjusted earnings per share,” AT&T Chairman and CEO Randall Stephenson said in the statement. “But just as important, the strategic moves we’ve made over the last few months to expand our wireless capacity and fortify our 5G leadership will be felt for years to come.”

AT&T agreed to acquire Time Warner for $85 billion in October, which would create a content and distribution behemoth that includes the Warner Bros. studio, CNN, HBO, TNT, DirecTV and AT&T Wireless. While President Donald Trump has been a vocal critic of CNN, which he’s called “fake news” numerous times — and even blasted the merger on the campaign trail — his pro-business administration is unlikely to put a last-minute wrench in the mega-merger. Stephenson met with Trump a few days before his inauguration and expressed plenty of confidence in an interview soon after that the transaction would go through.

“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.”

However, in a Feb. 27 interview with Breitbart, Trump said he didn’t “want to comment on any specific deal, but I do believe there has to be competition in the marketplace and maybe even more so with the media because it would be awfully bad after years if we ended up having one voice out there.”

While AT&T works toward adding Time Warner’s cornucopia of content, shareholders will also want a status update its live TV streaming service, DirecTV Now, launched late last year. AT&T announced that DirecTV Now had topped 200,000 subscribers in a Jan. 20 filing, and investors will certainly be looking for good news on that front, particularly as competitors including YouTube TV and Hulu’s live TV service hit the market. In its earnings release statement, AT&T reported 2.7 million wireless net adds, but did not provide any DirecTV Now guidance other than a mention of how “DirecTV Now gains help offset linear TV subscriber decline.”

Also, AT&T announced plans earlier this month to acquire wireless spectrum license holder Straight Path Communications in a $1.3 billion dollar deal transaction as it works to add capacity for its forthcoming 5G network. Straight Path is one of the country’s largest owners of 28 GHz and 39 GHz millimeter wave spectrum, which AT&T used earlier this year, alongside Nokia, to deliver a DirecTV Now stream in 5G. However, earlier on Tuesday, Reuters reported that Straight Path has received a superior bid from Verizon, one of AT&T’s biggest competitors in 5G.

AT&T will hold a conference call to discuss the earnings at 4:30 p.m. ET.