Skip to Content
Stock Analyst Update

Weak Fourth-Quarter Customer Metrics for AT&T

The narrow-moat firm reported solid margins, and we don't expect to change our fair value estimate.


 AT&T (T) delivered fourth-quarter results broadly consistent with its efforts to improve profitability, with generally soft customer growth metrics set against solid margins. We don’t expect to materially change our $37 fair value estimate, and we maintain our narrow moat rating. We continue to believe AT&T faces a difficult task in the entertainment business as the economics of the television business evolve, and we don’t share management’s view that segment profitability will stabilize in 2019. On the other hand, we believe the wireless business performed well, especially considering the strong customer growth both Verizon and T-Mobile posted during the quarter. WarnerMedia also produced strong top- and bottom-line results, despite HBO’s dispute with Dish, on solid performance at the box office.

Television customer losses have likely attracted the most investor attention. AT&T lost 391,000 traditional (satellite and U-Verse) customers during the quarter, bringing the decline in this customer base to 5% for the year. The firm’s online television offering DirecTV Now also lost 267,000 customers. These results were in keeping with AT&T’s pledge to rationalize television pricing to ensure that all customers deliver reasonable margins. The firm claims the 500,000 Now customers on deep discounts at the start of the quarter have either dropped the service or traded up, lifting average revenue per customer to roughly $46 per month from about $35 in the prior quarter. Segment revenue dropped at the slowest pace in more than a year (3%), though margins continue to contract.

In the wireless business, AT&T added 134,000 net postpaid phone customers, remaining in the black on this measure for the third consecutive quarter despite the decision to not chase year-end promotions. Prepaid customer net additions, a focus for the firm, dropped sharply to 26,000. Still, wireless service revenue growth accelerated to 3% and operating income jumped 19%, adjusted for accounting changes.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Michael Hodel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.