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AT&T missed revenue and earnings estimates for the first quarter of 2020, with a 4.6% top-line decline driven by lower revenue at WarnerMedia and ongoing losses in its pay-TV biz, which shed 1 million subscribers in the period. The telco also blamed the current coronavirus crisis as cutting into profits.

The company reported Q1 revenue of $42.78 billion and net income of $4.58 billion (adjusted earnings of 84 cents per share). Wall Street consensus estimates pegged revenue at $44.15 billion and adjusted EPS at 85 cents.

The lower-than-expected revenue was “primarily due to declines at WarnerMedia reflecting strong theatrical carryover revenues in the first quarter of 2019,” as well as continued declines in video subscriptions and legacy services, AT&T said.

The COVID-19 pandemic reduced earnings by $433 million (or 5 cents per share) in the first quarter and cut revenue by $600 million (mostly from lower sports-related advertising and lower wireless equipment sales), according to AT&T. Backing out the impact of the coronavirus crisis, “the quarter was about what we expected — strong wireless numbers that covered the HBO Max investment, and produced stable EBITDA and EBITDA margins,” Randall Stephenson, AT&T’s chairman and CEO, said in announcing earnings.

In reporting Q1 earnings, AT&T said, “Due to the lack of visibility related to COVID-19 pandemic and recovery, the company has withdrawn financial guidance at this time.” The company last month warned investors that the COVID-19 pandemic could have a material impact on the business.

For Q1, WarnerMedia had $7.4 billion in revenue, down 12.2% from $8.4 billion from a year earlier. The biggest hit to the media segment’s top line was a $540 million decline for the “eliminations and other” line item.

Turner revenue for the first quarter of 2020 was $3.2 billion, down 8.2%, driven by lower ad revenue primarily from the cancellation of the NCAA March Madness men’s basketball tournament. HBO’s revenue was $1.5 billion, down 0.9%, while operating expenses increased 13.9% to $1.1 billion mainly because of content investments for HBO Max.

AT&T said Warner Bros.’s 7.9% decline in revenue for Q1, to $3.2 billion, was attributable to “unfavorable comparisons” to the prior-year period (which included carryover revenue from the theatrical release of “Aquaman”). WB also had lower initial telecast revenues for the most recent quarter resulting from coronavirus-related TV production delays.

The telco’s pay-TV business, meanwhile, continued its downward trajectory: Video entertainment revenue dropped 8.4% year over year, to $7.4 billion.

AT&T had approximately 19.4 million video connections at the end of March — down 1.04 million sequentially and a 19% year-over-year drop. The Q1 numbers included a net loss of of 897,000 subs for DirecTV and AT&T TV, the telco’s broadband-delivered pay-TV service. Subscribers to the AT&T TV Now over-the-top video service declined by 138,000.

A day earlier, WarnerMedia announced May 27 as the launch date for HBO Max, its super-sized subscription video service engineered to battle Netflix, Hulu and others. AT&T will bundle HBO Max with its most expensive TV, wireless and internet plans and offer free trials for most other customers ranging from one to 12 months. In addition, HBO subs on DirecTV and other AT&T TV services will be automatically upgraded to HBO Max.

AT&T reported $147.2 in long-term debt at the end of March, versus $151.3 billion at the end of 2019. Cash and equivalents stood at $9.96 billion at the end of Q1, down from $12.13 billion three months prior.

During a conference call with Wall Street analysts, AT&T leaders emphasized that the company is still generating solid cash flow and has flexibility in its credit agreements.

Stephenson and CFO John Stephens assured analysts that the company was committed to making its dividend payments, paying down its mountain of debt and investing in growth initiatives such as the expansion of 5G service in the U.S. and HBO Max. In the face of COVID-19 headwinds, however, the company has suspended its stock buyback program and withdrawn previous financial guidance for 2020.

“AT&T has been through a lot of other crises before. Each time you’ve seen us emerge in a stronger position,” Stephenson said.

John Stankey, AT&T chief operating officer, referenced the movement at Warner Bros. and other Hollywood studios to make movies that had been destined for theatrical release available for on-demand purchases given the unprecedented shuttering of movie theaters. He noted that the long-term change in consumer behavior spurred by the pandemic is likely to drive larger changes in distribution and marketing strategies.

“This will change many things including consumer behaviors and expectations,” Stankey said. He pointed to the decision announced Tuesday by Warner Bros. to make its family-friendly “Scoob” animated movie available for $19.99 as a rental or $24.99 for sale as of May 15. The title will eventually wind up on HBO Max.

“We’re rethinking our theatrical model. We’re accelerating efforts consistent with the rapid changes in consumer behavior from the pandemic,” Stankey said. “We’re focused on finding and leveraging the new normal across all of our operations.”

Stephenson and other executives said the shift in AT&T’s cellular and wireless network usage patterns has been dramatic in recent weeks as activity has clearly moved out of urban business centers to suburbs and residential areas amid widespread work-from-home mandates.

“We’re seeing heavy, heavy volumes out of the home,” Stephenson said. “It’s impressive to see how much (economic) activity is going on by virtue of the connectivity facilitated into the homes.”

Stephenson and Stankey credited AT&T’s investments in its network capabilities as positioning the company well for the work-from-home moment. “We as an industry are taking a lot of satisfaction in terms of how these networks are standing up to the shift in volume and the increase in volume,” Stephenson said.

Stephenson asserted that the lighter regulatory approach to high-speed data services in the U.S. compared to other countries has paid off, as service providers had more financial incentives to build strong networks with the ability to expand as demand for broadband services grows apace.

“The incentive to invest, building capacity and cushions of capacity are playing out,” Stephenson said. “We hope as we come out of this our public policy folks take a hard look at this.”

During the COVID-19 pandemic, AT&T said it has instituted work-from-home policies, with about 50% of its employees working remotely. The telco said it has adopted “protection protocols” for those who cannot work from home.

Cynthia Littleton contributed to this report.