AT&T beat Wall Street estimates for the fourth quarter of 2021, with WarnerMedia revenue gains driving top results, helped by strong growth from HBO Max, though the division’s operating income fell 38% due to higher costs. .
The company also announced that it expects the WarnerMedia spinoff and merger with Discovery to close in the second quarter (previously, it had set closing for mid-2022). AT&T said it plans to host a virtual analyst event in the first half of March, providing financial guidance on what the telco’s communications business will look like after WarnerMedia.
Click here to register VarietyThe free Strictly Business newsletter from Strictly Business covering earnings, financial news and more.
Earlier this month, the telecommunications company previously announced fourth-quarter results for HBO/HBO Max subscribers, beating its own forecast: the services at the end of the year had a combined 73.8 million global subscribers, 4, 3 million more sequentially, above AT&T’s guidance upper limit of 70 million. -73 million.
HBO and HBO Max ended 2021 with 46.8 million US subscribers, a net gain of 1.6 million in the fourth quarter (after a net loss of 1.9 million in the previous quarter stemming from the end of the HBO distribution agreement with Amazon). HBO/HBO Max national average revenue per subscriber was $11.15 in the quarter, compared to ARPU of $11.82 in the third quarter of 2021 and $11.46 in the prior year period.
WarnerMedia’s total revenue grew 15.4% to $9.9 billion, driven by content licensing revenue and strong growth in direct-to-consumer subscriptions, AT&T said. Direct-to-consumer subscription revenue increased 11.5% year-over-year to $1.9 billion, but declined sequentially from $2 billion in the third quarter (a decline AT&T said was due to the termination of the deal). of reselling HBO with Amazon). Direct costs supporting DTC’s business increased approximately 44% to $2.3 billion in the fourth quarter of 2021 from $1.6 billion in the prior year quarter.
Overall, WarnerMedia’s operating expenses in the fourth quarter increased 38% to $8.3 billion, due to higher film and programming costs and higher marketing expenses. The biggest expenses included $380 million in DirecTV advertising revenue distribution costs for inventory sold by WarnerMedia, following AT&T’s spin-off last summer from DirecTV. Segment operating income of $1.6 billion was down 37.8% year over year.
Fourth-quarter earnings will be among the last for AT&T to include WarnerMedia, following its $43 billion merger with Discovery in the second quarter pending regulatory approvals, including from the Justice Department.
Overall, AT&T’s revenue in the fourth quarter of 2021 was $41 billion, down 10.4% from the same period a year ago. The company posted net income of $5.04 billion, or adjusted earnings of 78 cents per share. Wall Street analysts on average expected AT&T to report revenue of $40.43 billion and EPS of 76 cents for the year-end quarter, according to Refinitiv data.
The year-on-year drop in AT&T’s revenue in the quarter was mainly due to the July 31 spin-off of the telco’s US video business, including DirecTV, in a deal with private equity firm TPG Capital. (Excluding the pay-TV business, total fourth-quarter revenue was up 4.2%, according to the telco.) WarnerMedia’s higher revenue reflected “partial recovery from the impacts of the previous year’s pandemic,” while AT&T also touted higher wireless and consumer revenue. fixed telephony income.
A bright spot for Warner Bros. in the fourth quarter was “Dune,” which grossed $398 million at the worldwide box office despite the theater business braving the pandemic and the fact that the epic sci-fi flick was made available. October 21 day and night. date on HBO Max premium tier for 30 days.
Although it expects to spin off WarnerMedia in the second quarter, AT&T issued full-year 2022 guidance for the media segment. It projected annual WarnerMedia revenue of $37 billion to $39 billion, EBITDA of $6 billion to $7 billion, and a revenue contribution of approximately $3 billion. That compares to WarnerMedia’s 2021 revenue of $35.6 billion, operating income of $7.24 billion, and revenue contribution of $7.28 billion.
On the earnings call, CFO Pascal Desroches said 2022 is expected to be the “biggest investment year” for HBO Max. (The forecast assumes the full-year inclusion of AT&T’s programmatic advertising division Xandr, which it is selling to Microsoft.)
AT&T CEO John Stankey reiterated on the call that the regulatory approval process for the WarnerMedia-Discovery deal has presented no surprises. He said the telecommunications company’s board has not yet decided whether to sell WarnerMedia as a spin-off (in which AT&T shareholders would receive shares in the new WarnerMedia-Discovery) or as a split (in which shareholders would have the option to take stock in AT&T or the new media company). Stankey told analysts that he hoped to provide an update on the matter during the March investor presentation.
For the full year of 2021, AT&T said it gained 3.2 million postpaid phone net adds, more than the previous 10 years combined. It ended the year with 67.3 million postpaid wireless subscribers.
(Pictured above: Zendaya and Timothée Chalamet in Denis Villeneuve’s “Dune”)
variety.com
George is Digismak’s reported cum editor with 13 years of experience in Journalism