Why a Massive New Gigabit Upgrade, Instead of DirecTV Acquisition, Made No Sense

Two years ago, when DirecTV was acquired by AT&T, it would have been easy to find detractors arguing that AT&T should have spent that money investing in fiber to home infrastructure. With linear video cord cutting possibly accelerating, the new version of that story is being heard again.

So what should AT&T have done with $67 billion, assuming a 4.6 percent cost of capital? Cost of capital is the annualized return a borrower or equity issuer (paying a dividend) incurs simply to cover the cost of borrowing.

In AT&T’s case, the breakeven rate is 4.6 percent, which is the cost of borrowing itself. To earn an actual return, AT&T has to generate new revenue above 4.6 percent.

First of all, AT&T would not have borrowed $67 billion if it needed to add about three million new fiber to home locations per year. Assume that was all incremental capital, above and beyond what AT&T normally spends for new and rehab access facilities.

Assume that for logistical reasons, AT&T really can only build about three million locations each year, gets a 25-percent initial take rate, spends $700 to pass a location and then $500 to activate a customer location. Assume account revenue is $80 a month.

AT&T would spend about $2.1 billion to build three million new FTTH locations. At a 25-percent initial take rate, AT&T spends about $525 million to provide service to new accounts. So annual cost is about $2.65 billion, to earn about $720 million in new revenue (not all of which is incremental, as some of the new FTTH customers are upgrading from DSL).

The simple point is that building three million new FTTH locations per year, and selling $80 in services to a quarter of those locations, immediately,  does not recover the cost of capital.

The DirecTV acquisition, on the other hand, boosted AT&T cash flow about 40 percent.

Basically, even if AT&T had not purchased DirecTV, and began a new program adding three million new gigabit passings per year, those investments would not increase AT&T cash flow in the near term, and possibly never would do so.

The same logic applies to the Time Warner acquisition, which not only moves AT&T into new segments of the content ecosystem, but also boosts cash flow and profit margins.

But the linear video business is declining, many obviously will note. All true. But linear assets create the foundation for over-the-top assets, which also come with lower operating cost (much lower fulfillment and provisioning, for example).

Also, no matter what the long-term impact might be, a huge boost in free cash flow still matters, as markets evolve.

The point is that the alternative of plowing capital into faster gigabit upgrades sounds reasonable, but simply fails to move the needle on cash flow.

U.S. Communications Market in Great Flux; Regulate Forward, Not Backwards

As U.S. regulators potentially are called upon to approve or reject a number of industry-transforming deals (Comcast acquisition of Time Warner Cable; Sprint acquisition of T-Mobile US; AT&T purchase of DirecTV or a Dish Network purchase of T-Mobile US), U.S. cable TV operators are preparing yet one more effort to enter the U.S. mobile business, after decades of struggling to do so.

The point is that although each specific deal will have to be considered on its own merits, the full range of deals, and coming capabilities, hints at the new competitive pressures to come in the U.S. mobile business.

Right now, U.S. regulators desire to maintain a U.S. mobile structure of four national providers, at a time when the two biggest leaders (AT&T and Verizon) have market share and financial strength dwarfing the two smaller providers (Sprint and T-Mobile US).

All of the possible deals will have ramifications for the U.S. mobile market, directly or indirectly. Consider the deals with indirect impact. Comcast’s bid to buy Time Warner Cable would have direct impact primarily in the high speed access market, where Comcast would become a dominant supplier of broadband access, with 40 percent U.S. market share.

Traditionally, that is a problem, as any major supplier with 30 percent share is deemed to have market power. But that broadband access share also would provide Comcast with an immediate ability to populate each access node as a public Wi-Fi hotspot, as Comcast, as are other cable operators, now are deploying new dual-mode routers with integrated public Wi-Fi capabilities, in addition to a subscriber private network.

That, in turn, would underpin a facilities-based approach to mobile service, using a “Wi-Fi-first” approach similar to that used by Republic Wireless, Scratch Wireless and TextNow Wireless.

AT&T’s potential bid to buy DirecTV would primarily expand AT&T’s share of the U.S. video entertainment market, vaulting AT&T into the top ranks of U.S. video entertainment providers, second perhaps only to Comcast.

Indirectly, though, that deal would bring enough new video subscribers, revenue and cash flow to allow AT&T more heft in what has now become a “triple-play” or “quadruple-play” communications market.

And though Verizon has tested and rejected a dual-access DirecTV plus mobile terminal able to supply both broadband and fixed Internet access, that approach might eventually prove useful to AT&T, though it would not be absolutely necessary to create a voice-video-Internet access triple-play service.

AT&T would be in position to create a national triple play based on use of DirecTV for video entertainment, and Long Term Evolution for voice and Internet access, even if the networks were not directly integrated using one terminal. Consumers already can use the Wi-Fi hotspot features of their smartphones to create such capabilities, while AT&T already sells the Home Base terminal that provides fixed LTE access.

Indirectly, then, that deal would change AT&T’s position in the mobile market.

Either a Sprint deal to buy T-Mobile US, or a Dish Network deal to buy T-Mobile US would directly rearrange market share in the U.S. mobile market, the first deal reducing the number of current players to three, while the latter deal would preserve four contestants.

But even if Sprint were to win approval to buy T-Mobile US, U.S. cable operators are expected to launch their own national mobile service, based in large part on use of the dual-mode Wi-Fi boxes, plus wholesale capacity sourced from one of the national mobile providers.

That would once again eventually create a situation where there were four national mobile providers, again.

The point is that the U.S. communications now is in a state of great flux. No decisions made on legacy market share will capture the future state of competition or the number of contestants able to lead the market.

As some would argue the Telecommunications Act of 1996 actually missed the point in major ways by stimulating voice competition at a time when the Internet was reshaping communications, regulating on the basis of legacy facts in the mobile market could miss the market as well.

Even though some might argue AT&T’s new national reach, after a DirecTV acquisition, would only create a bigger AT&T, such a move also would allow AT&T to provide more competition to cable on a national basis, something AT&T cannot do at present, in the fixed networks business.

If one assumes that cable entry into mobility also would create significant pressure on legacy mobile providers, then AT&T’s retail mobile market share would fall, as would Verizon’s share, though one carrier would gain some amount of wholesale revenue.

The larger point is that, if a Sprint deal to buy T-Mobile US is not launched, or not approved, the number of leading national U.S. mobile contestants likely could expand to five.

Dish combining with T-Mobile US would create a much-stronger competitor with similar advantages to an AT&T than owned DirecTV. For the first time, T-Mobile US could compete nationally with a triple-play or quadruple-play capability, depending on how one wishes to characterize the ability to sell video entertainment, voice, Internet access and mobile phone service using a satellite and mobile network.

The point is that markets are quite unstable. Though each discrete deal has to be evaluated separately, the combined impact of all the changes might yet provide reasonable amounts of competition across the triple-play and quadruple-play markets, even if each single deal appears to reduce competition.

Coould AT&T Become the Largest U.S. Video Entertainment Supplier? Possibly

Will AT&T become the biggest U.S. linear video services provider sometime in 2015? Possibly.

The scenario would have to involve two key developments: AT&T gets Federal Communications Commission and Department of Justice approval to buy DirecTV, and does not have to divest significant numbers of its customers (fixed or satellite).

The second requirement for this scenario is that Comcast is denied permission to buy Time Warner Cable.

In that instance, it is conceivable that AT&T might have 25.8 million video customers, while Comcast might have 21.7 million video customers.

Of course, the Department of Justice will have gotten AT&T agreement to take some measures to  “maintain competition” in the video market. Frequently, that takes the form of agreements to maintain prices and terms of service for a time, programs to support services for low-income customers and so forth.

Whether the DoJ will require divesting customers is the issue.

Nor is it clear whether Comcast’s purchase of Time Warner Cable will be cleared or denied.  If approved, AT&T would be the second-largest video provider.

AT&T reportedly has reached agreement with the U.S. Department of Justice on conditions to be observed if AT&T completes its acquisition of DirecTV, according to a report by the New York Post.

AT&T wants to acquire DirecTV for $48.5 billion, a move that would gain AT&T 20 million video entertainment customers.

If the report is correct, the DoJ will not oppose the deal on antitrust grounds.

Comcast will face the same sort of scrutiny by DoJ regarding its proposed acquisition of Time Warner Cable.

In both cases, antitrust officials will be analyzing the impact of both deals on the level of competition in the U.S. market.

Ironically, though many would argue that Comcast is correct in stating its acquisition would not affect the level of local competition, since the two firms do not actually overlap each other in local areas, the analysis will likely focus on the national impact of the deal.

In AT&T’s case, the acquisition actually would remove one video provider on a national basis, but arguably could provide more competition on the local level.

That argument rests in part on the fact that AT&T only operates in 22 of the 50 U.S. states, and is extremely unlikely to get approval to grow its fixed network footprint any further.

On the other hand, by adding a nationwide video capability, AT&T arguably could combine DirecTV with mobile Internet and voice access, to create a nationwide triple play offer that would compete against cable offers and other telco offers on a national basis. And that arguably will increase the amount of effective local competition, though reducing the supplier base by one provider.

In other words, the difference between the two deals is impact on competition nationally, in the case of Comcast, and locally, in the case of AT&T.

If allowed to buy Time Warner Cable, Comcast would have 40 percent share of the U.S. market for high speed access.

Traditionally, a 30-percent threshold has been important in antitrust reviews. Basically, it is rare for any provider to be allowed to obtain market share greater than 30 percent, for any particular service.

So 40 percent share of the strategic and anchor high speed access service is likely to be the issue for Comcast. Even after it acquires DirecTV, AT&T would have less than 30 percent share of the U.S. linear video subscription business, ranking second, after Comcast.

What are Cash Flow Implications of an AT&T Sale of DirecTV?

One question some of us have about any sale by AT&T of its DirecTV asset is the impact on free cash flow, which might have been as much as 13 percent of total cash flow, or possibly more, by some accounts 

In late 2019 DirecTV was said to be spinning off about $4 billion in annual cash flow, which seems low to me, but appears to be about right. In the first full year of ownership, DirecTV likely produced $12 billion of free cash flow.

Some speculate that AT&T could retain a minority interest in the business, and some of the cash flow. The point is that the cash flow implications of selling DirecTV are far less than would have been the case five years ago, when it appears the cash flow was three times higher.

Aside from the need for high cash flow to help pay down debt, the company also requires high cash flow to pay its dividends. Though not a popular position, the DirecTV acquisition made sense to me as the only viable way to add so much cash flow so fast. 

Some had suggested the alternative of investing the capital in fiber to home facilities, but I never understood how cash flow could be boosted fast enough that way. Some might argue a massive diversion of capital to FTTH would not have recovered cost of capital, much less begun generating significant new cash flows within a year. 

When DirecTV was acquired by AT&T, it would have been easy to find detractors arguing that AT&T should have spent that money investing in fiber to home infrastructure. The new story is hat AT&T should not have done so, as the asset is wasting away. 

So what should AT&T have done with $67 billion, assuming a 4.6 percent cost of capital? Cost of capital is the annualized return a borrower or equity issuer (paying a dividend) incurs simply to cover the cost of borrowing.

In AT&T’s case, the breakeven rate is 4.6 percent, which is the cost of borrowing itself. To earn an actual return, AT&T has to generate new revenue above 4.6 percent.

Assume that for logistical reasons, AT&T really can only build about three million locations each year, gets a 25-percent initial take rate, spends $700 to pass a location and then $500 to activate a customer location. Assume account revenue is $80 a month.

AT&T would spend about $2.1 billion to build three million new FTTH locations. At a 25-percent initial take rate, AT&T spends about $525 million to provide service to new accounts. So annual cost is about $2.65 billion, to earn about $720 million in new revenue (not all of which is incremental, as some of the new FTTH customers are upgrading from DSL).

The simple point is that building three million new FTTH locations per year, and selling $80 in services to a quarter of those locations, immediately,  does not recover the cost of capital.

So as controversial as the DirecTV buy might be, it at least had the advantage of throwing off cash flow. It is unclear whether the alternative of a big new FTTH build would have done even that well. At the time AT&T made the acquisition, DirecTV likely was throwing off something like

Media and Telecom Debt Bomb?

If an anticipated wave of big media and communications mergers happens, a significant number of big firms are going to come under scrutiny for their new debt loads. Right now, AT&T is in the spotlight, but either Disney or Comcast or maybe both will face scrutiny as well, as their debt loads are going to climb, depending on which firm winds up buying the Twenty-First Century Fox assets.

But those moves perhaps illustrate the risks firms in the media and communications industries now might have to undertake in order to reposition for the next phase of industry change.

Adding debt to acquire new assets is a gamble many firms will conclude they must make. For media firms, it now appears that Netflix has changed the game, forcing both a new global distribution focus and a need to shift beyond traditional distribution to streaming alternatives at greater scale.

For tier-one access providers, the issue longer has been the maturation of the access business (fixed and mobile) and the search for alternative revenue sources as voice, messaging and internet access businesses shrink or plateau.

There were many criticisms of the AT&T acquisition of DirecTV at the time. Some believed that AT&T would have been better served investing capital in its fixed network. Others argued that even if AT&T wanted to grow its video subscription business, it would have been better to try and grow organically. Some argued that linear video was a mature business, at best.

Some focused principally on the debt load. Others might have focused on the purchase price, which is related to the issue of debt burden.

AT&T of course had, and has, a strategic rationale. The company has a voracious free cash flow need to support and grow its dividend. The firm arguably also was executing on a plan to move revenue opportunities “up the stack,” into applications. And video entertainment subscriptions are among the few huge and proven consumer apps that are dependent on the networks AT&T operates.

Since then, video has contributed to supporting AT&T’s mobile business, apparently reducing churn and increasing net new subscriptions. In 2017 the entertainment group generated $51 billion of revenue, throwing off $11.6 to $12 billion in revenue every quarter, mostly from video operations.

Those results suggest AT&T could not have grown its video business organically. DirecTV contributes about 82 percent of AT&T video subscription revenue, and AT&T now is the largest U.S. linear video provider, something it almost certainly could not achieved, in the years since the DirecTV acquisition, had it tried to grow organically.

At the end of the fourth quarter, AT&T had about 3.7 million linear video accounts, while DirecTV had 20.3 million accounts. One might well argue it would have been impossible for AT&T to grow its linear business organically, by an order of magnitude, in just a couple of years. Even if AT&T had unlimited capital to invest in its linear video business, it could not have grown that fast.

To be sure, profit margins from the consumer segment are far lower than from business services or consumer mobility, but DirecTV also represents 70 percent or more of consumer fixed network revenue, and perhaps 25 percent of free cash flow (prior to the Time Warner acquisition, which might add another $4 billion of free cash flow and perhaps $31 billion in annual revenue).

Is there risk? Of course. But the traditional media and communications industries are under pressure, and consolidation is among the ways they hope to cope with greater competition and slower growth in the core businesses.

AT&T Critics are Simply Wrong About Linear Video

Inevitably, aside from claims that the “wheels are coming off” the linear video business, there will be renewed criticism that AT&T should instead have spent the capital used to acquire DirecTV, and then (if approved by regulators) Time Warner, to upgrade its consumer access networks.

The critics are wrong; simply wrong, even if it sounds reasonable that AT&T could have launched a massive upgrade of its fixed networks, instead of buying DirecTV or Time Warner (assuming the acquisition is approved).

AT&T already has said it had linear video subscriber losses of about 90,000 net accounts in the third quarter. In its second quarter, net losses from U-verse and DirecTV amounted to about 351,000 accounts.

Keep in mind that, as the largest U.S. linear video provider, AT&T will lose the most customers, all other things being equal, when the market shrinks.

Some have speculated that AT&T potential losses could be as high as 390,000 linear accounts.

Such criticisms about AT&T video strategy might seem reasonable enough upon first glance.

Sure, if AT&T is losing internet access customers to cable operators because it only can offer slower digital subscriber line service, then investing more in internet access speeds will help AT&T stem some of those losses.

What such criticisms miss is that that advice essentially is an admonition to move further in the direction of becoming a “dumb pipe” access provider, and increasingly, a “one-service” provider in the fixed business.

That key implication might not be immediately obvious.

But with voice revenues also dropping, and without a role in linear or streaming subscription businesses, AT&T would increasingly be reliant on access revenues for its revenue.

Here is the fundamental problem: in the competitive era, it has become impossible for a scale provider (cable or telco) to build a sustainable business case on a single anchor service: not video entertainment, not voice, not internet access.

In fact, it no longer is possible to sustain profits without both consumer and business customers, something the cable industry is finding.

So the argument that AT&T “should have” invested in upgraded access networks--instead of moving up the stack with Time Warner and amassing more accounts in linear video with the DirecTV buy--is functionally a call to become a single-service dumb pipe provider.

That will not work, and the problem is simple math. In the fiercely-competitive U.S. fixed services market, any competent scale player is going to build a full network and strand between 40 percent and 60 percent of the assets. In other words, no revenue will be earned on up to 60 percent of the deployed access assets.

No single service (voice, video, internet access) is big enough to support a cabled fixed network. Period.

That is why all scale providers sell at least three consumer services. The strategy is to sell more units to fewer customers. Selling three services per account is one way to compensate for all the stranded assets.

Assume revenue per unit is $33. If one provider had 100-percent adoption, 100 homes produce $3,000 in gross revenue per month. At 50 percent penetration (half of all homes passed are customers), just $1650 in gross revenue is generated.

At 40-percent take rates, gross revenue from 100 passed locations is $1320.

But consider a scenario where--on average--each account buys 2.5 services. Then, at 50-percent take rates, monthly gross revenue is $4125 per month. At 40-percent adoption, monthly revenue is $3300. You get the point: selling more products (units) to a smaller number of customers still can produce more revenue than selling one product to all locations passed.

The point is that it is not clear at all that AT&T could have spent capital to shore up its business model any more directly than by buying DirecTV and its accounts and cash flow.

That the linear model is past its peak is undeniable. But linear assets are the foundation of the streaming business, and still throw off important cash flow that buys time to make a bigger pivot.

One might argue AT&T could have purchased other assets, though it is not clear any other assets would have boosted the bottom and top lines as much as did DirecTV.

What is relatively clear is that spending money to become a dumb pipe internet access provider will not work for AT&T, even if all the DirecTV capital had been invested in gigabit networks. At best, AT&T might have eventually slowed the erosion of its dumb pipe internet access business. It would not have grown its business (revenue, profits, cash flow) enough to justify the diversion of capital.

Would AT&T be better off today, had it not bought DirecTV, and invested that capital in gigabit internet access? It is hard to see how that math would play. Just a bit after two years since the deal, AT&T would not even have finished upgrading most of the older DSL lines, much less have added enough new internet access accounts to justify the investment.

AT&T passes perhaps 62 million housing units. In 2015, it was able to deliver video to perhaps 33 million of those locations. Upgrading just those 33 million locations would take many years. A general rule of thumb is that a complete rebuild of a metro network takes at least three years, assuming capital is available to do so.

Even if AT&T was to attempt a rebuild of those 33 million locations, and assuming it could build three million units every year, it would still take a decade to finish the nationwide upgrade.

In other words, a massive gigabit upgrade, nationwide, would not have generated enough revenue or cash flow to justify the effort, one might well argue.

Assume AT&T has 40 percent share of internet access accounts in its former DSL markets. Assume that by activating that network, it can half the erosion of its internet access accounts. AT&T in recent quarters has lost perhaps 9,000 accounts per quarter. Assuming AT&T saves 10 percent of those accounts, that amounts to only about 900 accounts, nationwide.

That is not enough revenue to justify the effort, whatever the results might be after a decade, when all 33 million locations might be upgraded.

source: Bruce Kushnick

The simple point is that AT&T really did not have a choice to launch a massive broadband upgrade program, instead of buying DirecTV, and instead of buying Time Warner. The financial returns simply would not have been there.

Is There a Grand AT&T Video Strategy?

Otter Media, a venture between The Chernin Group and AT&T, has purchased a majority stake in Fullscreen, a global online media company. That investment is a concrete step in the direction of creating the ability to deliver entertainment video over the top and on demand.

Otter Media was established by AT&T and The Chernin Group to invest in, acquire and launch over-the-top (OTT) video services.

Fullscreen, founded in January 2011, works with more than 50,000 content creators who engage 450 million subscribers and generate four billion monthly views.

But that move is only part of what AT&T is doing in entertainment video. AT&T obviously would like higher take rates for U-verse video. But AT&T also wants to buy DirecTV as well.

All that should raise questions about the possible grand strategy. Could DirecTV eventually become AT&T's "standard" linear video platform, while the fixed and mobile networks become the platforms for on-demand, streamed video?

Of course, perhaps there is no unified grand theory, at least, not yet. Perhaps U-verse video remains an essential part of the fixed network triple-play value proposition. Perhaps DirecTV really is an out-of-region platform.

The DirecTV acquisition creates a national video footprint outside AT&T’s fixed network footprint, and in any case throws off significant cash flow, valuable in its own right, some would argue.

And, since virtually all observers see a more-important role for OTT entertainment video over time, investing in alternative enabling platforms makes sense as a hedge, if for no other reason than to free up bandwidth on the fixed network.

Some might argue that, eventually, AT&T might be tempted to rely primarily on DirecTV for linear video, thus freeing up more bandwidth on fixed networks that do not already have U-verse video.

Some might even speculate that AT&T might, at some future point, and especially if the shift to OTT accelerates, decide that U-verse video does not make sense, if it can bundle DirecTV in region.

That wouldn’t necessarily be an easy transition. But majority technology and business model changes rarely, if ever, are easy.

Times of technology and business model transition are difficult for incumbents: they have to protect and harvest a declining product or products, using an older technology base, while simultaneously nurturing growth of a new set of products, built on the new technology base, that might actually cannibalize the existing business.

That largely explains the behavior of linear TV distributors including cable TV, telco and satellite TV providers. Even if all see an eventual disruption of the linear model, all will strive mightily to protect revenues from the current model as best they can, creating hybrid products that add value to the legacy product set and provide a hoped-for bridge to the future.

That is why “TV Everywhere” requires that customers first buy the traditional linear product before they are able to use the streaming features.

The evolution of the consumer services market to a bundled product business (triple play, quadruple play) likewise is why both Dish Network and DirecTV have made moves to transition from satellite-only to hybrid or integrated models where a bundled product can be sold.

Verizon and AT&T arguably will do so as well, defending and harvesting linear video as long as possible, while investing in over the top, on demand delivery and revenue models.

That explains the investment in Otter. It is a hedge on a different future.

To some extent, the acquisition of DirecTV is an effort to gain significantly-greater share in a business producing significant cash flow, in the belief that the ability to bundle with mobile and other fixed network services.

Perhaps DirecTV is not even seen as an essential part of the future network transition to OTT delivery. But it might be helpful in other ways, such as creating content buying power.

Still, at least some might suggest an eventual AT&T move to end or limit support for U-verse video. Much would hinge on when that happens, and how strong consumer demand remains.

So long as linear video demand remains largely intact, there arguably is little need to do anything disruptive.

The big questions would come if linear video begins to decline fast, consumers opt to watch video entertainment OTT and content suppliers decide to support OTT in a big way. Then no linear video supplier would be able to avoid asking how much should be invested in delivering a product with rapidly-declining demand.

Under those circumstances, no linear video supplier would be able to avoid evaluating the value of linear video and network resources devoted to delivering linear video.

AT&T DirecTV Acquisition Seems to be Working

AT&T’s acquisition of DirecTV was not universally acclaimed when it happened. Some observers said AT&T needed to spend the money on better internet access. Others pointed out that the linear video business already was in decline.

Supporters argued that the move made AT&T a nationwide quadruple play supplier for the very first time. Others pointed out that the free cash flow almost singlehandedly would fund AT&T’s dividend for some time. Some added that the additional scale would improve economics for the firm’s video business now, while creating a much-stronger platform for OTT video to come.

So the new way to reassess that particular choice is whether you think AT&T or Verizon is in a better position, today, strategically.

If you believe all access providers will have to replace half of current revenues within 10 years, the only question is how to do so. In principle, you can make horizontal or vertical acquisitions, invest in new lines of business or grow organically.

Organic growth helps. How much that can help depends on whether a firm can take market share in a market or mostly has to defend its share, whether the markets are mature or young.

An attacking firm with low share always can grow by taking market share from incumbents. New entrants with different cost structures, attacking from “outside” an industry, with different assets, often have a much-easier time than incumbents attacking each other, with the same asset bases.

But most observers would argue that organic growth, in markets that are saturated, does not provide the scale of new revenue, fast enough.

And some critics might say AT&T faces issues with its DirecTV performance, in the form of subscriber losses in linear video. But the DirecTV Now OTT service, despite some issues, seems to have kept the video base at flat levels, in a business that is shrinking.

Average revenue per user is an issue, but AT&T seems to be reaping bundling rewards.

“Half of our DTV Now subscribers are coming from traditional pay-TV, mainly from our competitors, and the other half had no pay-TV service at all,” said John J. Stephens, AT&T CFO.

AT&T has “reached nearly 0.5 million subscribers,” keeping This has the video account base “essentially flat” from year ago levels, he said.

source: AT&T

Importantly, the bundling of video and mobile services seems to be working. The number of wireless subscribers who also have a TV service from us has increased by more than 4 million, or up 31%, since the close of the DTV deal. Conversely, TV subscribers with wireless plans have increased by nearly 1 million, or 18%.

The number of mobile subscribers with DTV has increased by 72 percent, while the number of DTV subscribers with AT&T Wireless has increased by 1.7 million, or 52 percent.

The number of DTV subscribers in AT&T’s wireline footprint with IP broadband has grown by more than 2.7 million, to 67 percent of DIRECTV customers, said Stephens.