AT&T on DIRECTV customer acquisitions
In this series, we will look at the highlights discussed by AT&T (T) at the recent Jefferies Technology, Media, and Telecom Conference. Scott Mair, AT&T’s senior vice president of technology planning and engineering, participated in that event on May 12, 2016.
During the conference, Mair mentioned the telecom company’s focus on DIRECTV (DTV). AT&T acquired DIRECTV on July 24, 2015.
During the conference, Mair addressed the DIRECTV deal: “We’re using both broadband play, if you will, for delivery of video, as well as satellite, and rotating more towards satellite; and then using the wireless network for over-the-top technology is what we’ve announced and discussed in our plans around some capability there.”
Video customer acquisitions in AT&T U-verse and DIRECTV
AT&T (T) has been focusing on growing its satellite TV base after its acquisition of DIRECTV. As shown in the above chart, on a net basis, the company lost U-verse video subscribers and gained satellite customers even in 1Q16.
AT&T attributed this trend in customer acquisitions in the video component to its focus on satellite TV customers. In terms of profitability, satellite TV customers are more attractive to the company than U-verse customers.
AT&T’s new OTT service to launch in 4Q16
Beginning in 4Q16, AT&T plans to initiate three services: DIRECTV Now, DIRECTV Mobile, and DIRECTV Preview. The market that AT&T is targeting for its over-the-top (or OTT) service is expected to expand in the medium term.
According to a report by eMarketer, non-pay TV households in the US are expected to increase from ~20.8 million in 2015 to ~28.1 million in 2019.
For diversified exposure to select telecom companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). This ETF held a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of April 2016.