AT&T Disappoints With Time Warner Merger

We remain disappointed with

As we’ve written previously, we are skeptical of the strategic benefits of combining content ownership and distribution. Thus, we will likely lower our AT&T fair value estimate to around $35 after sifting through the deal details and listening to the conference call discussing the merger on Monday morning.

AT&T also released third-quarter results. The firm showed some progress in its effort to stem postpaid wireless and television customer losses, but not to an extent that would cause us to significantly change our long-term expectations. The firm lost 268,000 postpaid phone customers, better than the 383,000 lost a year ago, but still the eighth consecutive quarterly decline. AT&T's postpaid customers remain among the most loyal in the business (monthly churn declined to 1.05% from 1.16% a year ago). Like

Within the television business, AT&T lost 31,000 net customers, less than half the number of a year ago. The Directv satellite business added 323,000 customers while the U-Verse segment shed 354,000. After a full year of operating Directv, we estimate AT&T is losing television customers at about the same pace as the industry, which continues to call the strategic benefits of the Directv acquisition into question, in our view.

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