AT&T Warns Of Lower Q3 Revenue, Pre-tax Profit On Hurricanes,Mexican Earthquakes

AT&T's Inc.'s (NYSE: T) shares fell on Thursday after a filing stating that third quarter earnings will be negatively impacted due to the natural disasters as well loss of video subscribers.

AT&T attributed the video losses to increased competition with other traditional pay-TV providers and streaming services, hurricanes and AT&T's stricter credit standards, according to the SEC filing. He said: "First, it should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting".

"No one should have expected AT&T's video subscriber results to be good in Q3", analyst Craig Moffett of MoffettNathanson wrote in a research note. In a third-quarter media industry forecast released today, Doug Mitchelson of UBS said he expects pay-TV subscriptions overall to decline 0.9% in the quarter compared with the same period a year ago, even with the first and second quarters. DirecTV and Comcast are seeing and responding to the same secular pressures. It is reasonable to expect a weak quarter for the whole pay-TV industry.

The analyst also noted that the steep decline in traditional subs means that it is "all but unthinkable" that AT&T will make an effort to acquire DirecTV's satellite TV rival Dish Network.

AT&T is not the only pay-TV provider to point to a more competitive environment.

MoffettNathanson believes the weakness in AT&T's pay-TV numbers shines a new light on the spate of aggressive promotions at AT&T, notably that nearly all of them appear to be centred on bundling, with the benefit seemingly toward bolstering video metrics at DirecTV.

AT&T warned that the drop in traditional video subs will hurt its revenues and margins.

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