Updated from Oct. 10 with additional information.
AT&T's (T) disclosure this week that it will lose more traditional video subscribers than expected in the third quarter continued to shake up the stocks of pay-TV providers on Friday. Renewed signs of cord cutting come a month after Comcast (CMCSA) provided similar guidance about third-quarter video subscribers.
The stakes are high for cable and broadband providers. If customers cut their cable TV and bundled landline phone service and only purchase broadband, a service provider stands to lose $32 in Ebitda per subscriber, Jefferies analyst Mike McCormack wrote in a Friday note. McCormack estimated that to make up the lost profits, a provider would have to charge $80 for a stand-alone broadband offering -- up from a current average of $49 per broadband user.
While its DirecTV Now streaming video service gained 300,000 subscribers in the third quarter, AT&T disclosed in a Wednesday filing with the Securities and Exchange Commission that it lost 390,000 subscribers to its traditional pay-TV video service.
"No one should have expected AT&T's video subscriber results to be good in Q3," Craig Moffett of MoffettNathanson wrote in a research note. "But we doubt anyone expected them to be this bad."
Shares of the Dallas telecom, which reports third-quarter earnings Oct. 24, dropped 0.9% to $35.55 on Friday afternoon, after losing 6.1% Thursday. The telecom also said that hurricanes and earthquakes in Mexico would cut earnings by two cents per share.
Comcast, which said in early September that it expects to lose 100,000 to 150,000 video subscribers in the third quarter, gained 0.1% to $35.99 on Friday afternoon. The stock dropped 1.5% Thursday following AT&T's disclosure. Comcast reports third-quarter results on Oct. 26.
Meanwhile, Satellite TV company Dish (DISH) fell 1.9% to $47.17 on Friday after dropping 5% Thursday, and cable operator Charter (CHTR) lost 0.2% to $355.01 Thursday following a decline of 2.6% on Thursday. Verizon (VZ) lost 0.8% to $48.02 Thursday, after a 1% drop a day earlier.
AT&T's streaming subscriptions help to offset lost traditional video subscribers, but will not fully replace the lost revenue. While DirecTV's satellite TV service goes for $50 per month, AT&T sells discounted DirecTV Now subscriptions for as little as $10 to unlimited wireless plan subscribers.
Despite the drop in total video subscribers, Wells Fargo analyst Marci Ryvicker had some positive takeaways from AT&T's guidance. DirecTV Now's gains of 300,000 streaming subscribers topped her forecasts of 200,000 subscriber gains. Despite the subscriber losses and damage from storms and earthquakes, she noted, AT&T maintained full-year guidance for 2017.
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