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Why AT&T’s Revenue Has Fallen

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May. 3 2018, Published 4:12 p.m. ET

AT&T posts weak 1Q18 results

AT&T (T) started the year on a weak note and disappointed investors with sluggish 1Q18 results on April 25. The company reported weaker-than-expected numbers and missed earnings and revenue expectations.

In 1Q18, AT&T generated adjusted EPS (earnings per share) of $0.85. While they missed the estimate of $0.87, its EPS grew 14.9% YoY (year-over-year) from $0.74. AT&T’s revenue of $38.0 billion also lagged behind analysts’ estimate of $39.3 billion and was marginally lower the $39.4 billion seen in 1Q17. In fact, the company’s 1Q18 revenue was the lowest in 11 quarters, as shown in the graph below. AT&T stock had fallen 12.7% year-to-date as of April 27.

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Reasons for AT&T’s weak performance

In 1Q18, AT&T added 2.6 million net new subscribers to its domestic wireless networks, mainly connected device and prepaid subscribers. The company lost 22,000 postpaid phone subscribers in 1Q18.

The telecom behemoth has been losing postpaid wireless subscribers due to the growing popularity of online streaming services. The OTT (over-the-top) market is dominated by streaming giants such as Netflix (NFLX), Amazon (AMZN) Prime, and Alphabet’s (GOOGL) YouTube. Consumers tend to prefer streaming services as they are often cheaper than traditional cable and can be watched anywhere.

With its declining pay-TV subscriber base, AT&T has launched a streaming service, DIRECTV Now, to attract customers. Similarly, Dish Network (DISH) has started its own streaming service, Sling TV.

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