AT&T Inc. expects lower third-quarter revenues and profit as a result of recent hurricanes and earthquakes in Mexico.
"Damage to our network and other property, costs to restore services, and revenue declines from waived charges will decrease" the company's reported third-quarter consolidated revenues by nearly $90 million and pre-tax earnings by about $210 million, or 2 cents per share, AT&T said in an Oct. 11 SEC filing. The company expects more reductions in the fourth quarter as it assesses damage and works to fully restore service.
The company, however, reiterated its full-year 2017 forecast of "mid-single-digit adjusted earnings growth, adjusted consolidated operating margin expansion, capital expenditures in the $22 billion range, and free cash flow at the low end of the $18 billion range."
AT&T also expects to report a net decline in total video subscribers, "driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards." The company said total U.S. video subscribers were down about 90,000. The company's DIRECTV NOW service, meanwhile, added a net 300,000 customers in the third quarter.
The company expanded its postpaid smartphone base despite having nearly 900,000 fewer handset equipment upgrades than in the previous year's third quarter. These lower upgrades will adversely impact wireless equipment revenue but do not affect gross adds.
Additionally, AT&T said it will report prepaid internet of things connections, primarily related to active subscribers for vehicle connectivity, as a separate class within its subscriber categories, effective July 1. The change will result in 97,000 additional prepaid net adds in the third quarter with a corresponding decline in connected device net adds. The prepaid subscriber base will be adjusted by an increase of 543,000 connections with a corresponding decline in the connected device subscriber base to reflect subscriber activity prior to the third quarter.