Daily Management Review

AT&T Forecats Profits After DirecTV Acquisition, Reports Inrceased Revenues


AT&T Forecats Profits After DirecTV Acquisition, Reports Inrceased Revenues
Following the DirecTV purchase and investments in Mexico, AT&T Inc expects revenue, earnings and free cash flow to grow through 2018 despite the company engaging in higher capital expenditure.

Revenue generation is expected to increase from the video assets of DirecTV's and the expanding wireless operations of the company in Mexico even as there is a market saturation in the U.S. wireless market.

The company hopes to unlock new revenue through the delivery of video content through ad-supported TV streaming and mobile video products. The company had acquitted DirecTV in July at a cost of $48.5 billion.

In a statement issued by the company, AT&T, the No. 2 U.S wireless carrier, expects revenue to grow in the double-digit range for the rest of 2015 even as the company expects a $3 billion rise in its forecast capital expenditure of $18 billion.

The company also adjusted the forecast earnings per share from $2.62 per share to $2.68 per share while the analysts are expecting the company to provide a profit per share to the tune of $2.60, according to Thomson Reuters I/B/E/S.

“In bringing together AT&T and DirecTV we've articulated a simple goal, the development of a premium, effortless entertainment experience delivered anywhere,” chief executive Randall Stephenson told analysts on a conference call.

In the current fiscal the shares of the company have risen by 3.2 percent even as there was a fall in the prices of the shares through Wednesday.

The recent expansion of the company has helped it to grow bigger than the biggest U.S. cable company Comcast Corp. It is also the world’s biggest pay-TV company serving more than 26 million customers in the US and more than 19 million in Latin America.

The company has used its huge customer base to cross sell products as AT&T has bundled its wireless service with DirecTV's pay-TV offerings.

Though the company did not provide any detailed sale figures, it noted that the recent offerings of new packages which were rolled out to the customers on Monday had exceeded sales expectations on launch and the company was looking forward to mopping up more revenue from the new products for the rest of the year.

The company expects that on an annual basis,, it would be able to save costs or synergies from the DirecTV deal to the tune of $2.5 billion till the next three years.

The company however has not yet factored in foreign currency fluctuations in DirecTV's markets such as Brazil and Venezuela and hence is not able to forecast on whether AT&T's cost-savings forecast was conservative or not, said chief financial officer John Stephens .

He believes that that the target of $2.5 billion in cost savings is achievable and "it could break to the upside".

New revenue opportunities, such as cross-selling products, were not included in the cost-savings goal as the company was "creating a new category" of combined wireless and TV services.