AT&T adds customers as the courts decide Time Warner deal

The company sees a reversal of losses from a year ago, with a strong number of new prepaid customers. And its DirecTV Now service is gaining momentum. Earnings, however, missed expectations.

AT&T posted its first-quarter results on Wednesday amid all the courtroom drama. 
Kena Betancur / AFP/Getty Images

The fate of the AT&T -- and potentially all media deals -- is in the hands of a judge on the US District Court for the District of Columbia. 

It's in the courtroom of Judge Richard Leon that AT&T and Time Warner are battling with the Justice Department over their right to merge, bringing together one of the largest telecom providers in the country with one of the highest profile media companies. AT&T CEO Randall Stephenson and Time Warner CEO Jeff Bewkes have poked holes in the concerns that the deal would hurt competition, and both believe the combination would allow them to better compete against tech titans like Google and Netflix. 

Time Warner plays a critical role in AT&T's attempts to transform itself into a media powerhouse. It's halfway there, having purchased satellite TV giant DirecTV. Furthermore, whether this deal goes through could have an impact on future consolidation in the media business, where we're already seeing deals like Walt Disney's pending acquisition of key assets of Fox

While all that's happening, AT&T posted its first-quarter results on Wednesday. 

The Dallas telecommunications giant posted a first-quarter profit of $4.76 billion, or 75 cents a share. On an adjusted basis, the company earned 85 cents a share. The company's revenue fell 3.4 percent to $38.04 billion.  Excluding the impact of some accounting changes, revenue was $38.9 billion.

Analysts, on average, forecasted earnings of 87 cents a share and revenue of $39.31 billion, according to Yahoo Finance

After missing expectations, shares are down 3.4 percent to $34.02 in after-hours trading. 

It's clear why AT&T wants to move into the media business, given the slowdown in the wireless business, and the intense competition. The last year has seen the wireless carriers push unlimited plans and bundle freebies like Hulu or, in AT&T's case, HBO as perk of the service. 

AT&T, however, did manage a reversal from its year-ago losses, helped by 192,000 new prepaid phone customers. The company still lost 22,000 postpaid phone customers, or people who pay their bills at the end of the month. Verizon said on Tuesday that it lost post-paid phone customers in the same period. 

AT&T added 125,000 net video customers, but that was entirely driven by the 312,000 new subscribers to its DirecTV Now online streaming service. Its traditional AT&T U-Verse and DirecTV satellite businesses are both in decline as customers increasingly drop their traditional pay-TV service in favor of so-called over-the-top services like Netflix and DirecTV Now.  

AT&T's strategy to own multiple business is designed to get customers to subscribe to multiple services, paying for wireless access, home internet and media. 

Looking ahead, the company is touting the upgrades to its networks as it prepares for the deployment of 5G. The company plans to launch its next-generation service in 12 markets this year. 

"We're off to a good start in 2018, both in growing our customer base and in building the world's premier gigabit network," Stephenson said in a statement. 

First published April 25 at 1:21 p.m. PT
Update at 3:24 p.m. PT: Adds a revenue figure that excludes the impact of some accounting changes.

Blockchain Decoded:  CNET looks at the tech powering bitcoin -- and soon, too, a myriad of services that will change your life.

Follow the Money: This is how digital cash is changing the way we save, shop and work.