TV Stocks Tumble After AT&T Cord-Cutting Disclosure

AT&T filing: Natural disasters hitting earnings; DirecTV Now at 300K adds

As more customers cut their cable and turn to streaming services, Dallas-based AT&T says it expects to lose about 390,000 traditional pay-TV subscribers this quarter, according to financial documents filed with the Securities and Exchange Commission.

AT&T said in its filing that the decline of traditional video subscribers will negatively impact its entertainment group revenue and margins.

AT&T Inc. said Wednesday that recent hurricanes to hit the US and Caribbean and earthquakes in Mexico would reduce third-quarter earnings per share by 2 cents and revenue by almost $90 million.

AT&T attributed the lower total video adds to more intense competition in the traditional pay-TV markets and OTT services, severe storms that hit the country, and tighter credit standards.

Thursday's carnage included shares of AMC Networks falling 7 percent; Dish Network off 5 percent; Discovery Communications, Sinclair Broadcast Group and E.W. Scripps Co. each off 4 percent; and Charter Communications down 3 percent.

In pre-released select video subscriber trends for the third quarter of 2017, AT&T estimates it will add 300,000 DirecTV Now subscribers for the period, beating analysts' expectations.

"It should be clear that DirecTV, like all of its cable peers, is suffering from the ravages of cord-cutting", said Craig Moffett, analyst at MoffettNathanson, in an email.

AT&T Inc.'s third-quarter video losses sent pay-TV industry shares down on Thursday after Wall Street analysts raised concerns about the continued threat of consumers canceling their cable and satellite television subscriptions. "The issue is in the acceleration in cord-cutting, and the prevalence of OTT, not each other", Moffett noted, adding that it's reasonable to expect a weak Q3 across the pay TV industry.

AT&T, which is getting set to report third-quarter earnings on October 24, warned Wall Street its results took a significant hit from hurricanes and the natural disaster in Mexico.

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