T AT&T Inc

By George Stahl and Thomas Gryta 

AT&T Inc., in addition to announcing its $85.4 billion deal to buy Time Warner Inc., reported its third-quarter financial results Saturday, which provided a view into the reasons why the company is seeking to diversify away from the U.S. wireless business.

In the U.S., AT&T lost 268,000 mainstream wireless phone customers. Phone additions are considered important because they provide more service revenue than tablets, and customers with postpaid phone accounts tend to stay longer. Including other devices, AT&T added a total of 212,000 mainstream wireless customers.

In all, AT&T's total wireless revenues dipped 0.7%, to $18.2 billion, which the company blamed on decreases in service and equipment revenue.

The results came three days early as AT&T also announced on Saturday its agreement to buy Time Warner Inc. The cash-and-stock deal values Time Warner -- owner of CNN, TNT, HBO and the Warner Bros. film and TV studio, among other things -- at $107.50 a share and transforms AT&T into a media giant.

The Time Warner deal is seen helping AT&T potentially find new areas of growth as its core wireless business has become saturated and its share of the mobile market leaves little room for acquisitions. In the competitive consumer wireless market, AT&T has been focused on retaining its most profitable customers and shying away from promotional offers to grab market share.

AT&T Chief Executive Randall Stephenson would head the new company. The companies said Time Warner Chief Executive Jeff Bewkes would stay for an interim period following the close of the deal to help with the transition.

AT&T already is the biggest U.S. pay-television operator after its $49 billion acquisition last year of DirecTV. The company's video business lost a net 3,000 customers in the quarter as additions in the DirecTV business failed to surpass the losses in its older U-Verse pay television service.

AT&T has been pushing customers to the satellite service since the DirecTV deal closed. AT&T lost almost 200,000 video customers in that time but has said it would be net positive for the year. It will now need to add 106,000 customers in the final quarter of the year to meet that goal.

Over all, for the quarter ended Sept. 30, AT&T's earnings increased to $3.33 billion, or 54 cents a share, from $2.99 billion, or 50 cents a share. Excluding certain costs -- such as those for amortization and integration -- AT&T had per-share earnings of 74 cents, flat from the year-ago period and in-line with the average analyst estimate on Thomson Reuters.

Revenue rose 4.6% to $40.89 billion, below the average analyst estimate of $41.15 billion on Thomson Reuters. The year-over-year increase largely reflected the DirecTV acquisition. Excluding DirecTV and foreign exchange, AT&T said revenue was essentially flat, as growth in video and IP-based services mostly offset pressures from declines in wireless and legacy services.

Along with its quarterly report, AT&T also raised its quarterly dividend by 2.1%, to 49 cents from 48 cents, representing its 33rd straight annual increase.

Write to George Stahl at george.stahl@wsj.com and Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

October 22, 2016 22:38 ET (02:38 GMT)

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