AT&T signals layoffs as it takes $430 million coronavirus hit

Telecom giant AT&T said Wednesday warned that job cuts are likely on the horizon as its first-quarter results took a $430 million hit from the coronavirus.

AT&T Chief Executive Officer Randall Stephenson told investors that “the economic effects of the pandemic and resulting societal changes are currently not predictable,” and that the firm has “withdrawn financial guidance, at this time.”

Like its rivals in Hollywood, AT&T entertainment division WarnerMedia has been forced to suspend film and television production, as well as rejigger its slate of films, as movie theaters worldwide have been crushed by quarantine measures. And, the company’s Turner division has been hit as live TV sports have ground to a halt and advertising has severely declined.

Meanwhile, the company has been losing pay-TV subscribers and ceding ground to streaming giants.

AT&T said it lost 138,000 subscribers at its AT&T TV Now streaming service in the period, following a loss of 219,000 in the fourth quarter and a loss of 83,000 in the year-ago period. It also recorded an 897,000 loss of premium TV subscribers at DirecTV and U-Verse, compared with a loss of 945,000 in the fourth quarter and a year-ago loss of 544,000. Overall, it lost 1.04 million TV subscribers.

Stephenson said he’s looking at possible job cuts and other cost efficiencies in order to stem the bleeding.

“We’re sizing our operations to reflect the new economic activity level. And we’re leaning into our cost and efficiency initiatives,” he said without referring specifically to any particular division.

WarnerMedia boss John Stankey, signaled that cuts were likely at his division, even as it readies to launch streaming service HBO Max on May 27.

“We’re not backing off our cost and efficiency transformation initiatives that remained largely under our control,” Stankey said. “If anything, we see this as an opportunity to approach all of our business differently, and better align our work with how COVID has reshaped customer behaviors and the economy.”

He reiterated AT&T anticipated $6 billion in cost savings over the next three years “and improved market effectiveness.” The exec also talked about movie theaters eventually reopening and changes to come with the traditional theatrical window.

“Don’t expect there’s going to be a snapback,” Stankey said of movie theater attendance. The WarnerMedia boss added his studio is “rethinking our theatrical model and looking for ways to accelerate efforts that are consistent with the rapid change in consumer behavior from the pandemic.”

He pointed to WarnerMedia’s Tuesday announcement that it will send its animated film “Scoob!’straight to premium on-demand, as opposed to waiting for theaters to reopen.

The exec said that during the quarter, WarnerMedia saw its operating income fall 24.3 percent, to $1.7 billion. Revenue dipped 12.2 percent, to $7.4 billion.

Overall, AT&T reported net income of $4.58 billion, or 63 cents share. Excluding items, EPS totaled 84 cents on total revenue of $42.8 billion.

The company said that the first quarter took a $430 million or 5-cent-a-share hit due to incremental costs “associated with bad debt reserves, voluntary corporate actions taken primarily to compensate front-line employees and contractors, and WarnerMedia production shutdown costs.”

Wall Street was looking for EPS of 85 cents on revenue of $44.21 billion.

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