AT&T on Wednesday provided the first glimpse at how it expects its $48.5 billion purchase of DirecTV to affect its finances.
In new guidance, AT&T said it expects double-digit revenue growth for full-year 2015 and adjusted Earnings Per Share (EPS) in the range of $2.62 to $2.68.
In all, AT&T expects $2.5 billion in run-rate cost synergies from the DirecTV transaction by 2018, which Chairman and CEO Randall Stephenson called “conservative.”
The company set out rough expectations for 2016 through 2018, saying that consolidated revenue growth would be in line with GDP growth or better and adjusted EPS growth would be in mid single-digit range or better.
Now the largest provider of pay TV services in the country with more than 26 million customers in the United States, AT&T said it is raising its capital spending to be in the $21 billion range, including capitalized interest from spectrum.
AT&T gave an extensive overview of its business and network during a morning call with investors and analysts that was broadcast online.
Stephenson said that he wasn’t concerned about the trend towards cord cutting, as it was tracking pretty close to what AT&T had expected going into the DirecTV buy. He said that while the way people watch TV is changing, they’re nevertheless watching content.
“It’s a manageable decline,” Stephenson said, adding that he thinks that through the use of wireless and other screen, AT&T can continue to grow revenue per household for the foreseeable future.
Stephenson said that millennials, commonly referred to as “cord nevers,” are authenticating using their parent’s accounts so that they can watch TV via cable networks on their phones. He framed that situation as perfectly suited for a mobile share model for content.
John Stankey, CEO of AT&T’s entertainment and Internet services, stressed the importance of mobile going forward, saying that AT&T will continue rolling out products that encourage wireless users to consume content on the AT&T platform. Stankey played up the advantage that the DirecTV buy gives AT&T, especially in the context of its wireless and broadband assets.
“I want Comcast to really regret that they don’t have a wireless asset,” Stankey said. “I want them to have to do something. That’s success for me.”
Investors weren’t encouraged by the news, as shares of AT&T were down 3 percent in early trading to $33.60.
