AT&T has been reporting big customer losses each quarter for the past two years, with AT&T’s rising TV prices helping push users to other TV or online streaming services. After a Q2 2020 loss of 954,000 customers, AT&T was down to 18.41 million customers across DirecTV, U-verse TV, and AT&T-branded online TV services. That’s a loss of more than 7 million customers since mid-2018 when AT&T had 25.45 million subscribers in those categories.
To sum it up – a perception of necessity (the wireless business was turning more commodity), the CEO-at-the-time’s use of debt to invest their way out of that commodity perception and a bad understanding of what they were buying. ATT was trying to avoid just being the pipe to everyone’s iPhone – that was a low-profit business. So buy subscribers and buy content (we won’t even get into the ATT acquisition of Time Warner) so they can bundle them together to sell to us.
In the Directv scenario, the ‘stickiness’ of clients with those ubiquitous satellite dishes on their roof was not as much a long term annuity stream as they hoped. ATT didn’t read appreciate the contracts everyone signed and when they would come due! The ARR (annual renewable revenues) was locked in and clients could just say ‘BYE BYE’ when it was over if they went to an all-internet streaming option.
What should ATT had done?
Just like in the movie ‘The Big Short’, Christian Bale’s character ‘Dr Michael Burry’ was asked how he knew the mortgage bonds were going to default. Consider this from the movie (Lawrence Fields is a key investor in this conversation):
- Michael Burry: Lawrence, I found something really interesting.
- Lawrence Fields: Great, Michael. Whenever you find something interesting, we all tend to make money. What stock are you valuing?
- Michael Burry: No stocks. I want to short the housing market.
- Michael Burry: It’s only a matter of time before someone else sees this investment. We have to act now.
- Lawrence Fields: And how do you know these bonds are built on subprime crap? Aren’t they filled with hundreds of pages of mortgages?
- Michael Burry: I read them.
- Lawrence Fields: You read them? No one reads them. Only the lawyers who put them together read them.
- Michael Burry: I don’t think they even know what they made. The whole housing market is propped up on these bad loans. It’s a time bomb, and I want to short it.
If ATT analyzed the Directv contracts and considered much like how ‘Michael’. But unlike the movie, the consumer language in those millions of contracts were much more basic – and a risk to ATT.
That risk is now costing them billions! The ‘satellite TV’ time bomb for ATT is going off!
InfoDNA Solutions could had seen this coming – and can help any organization who is looking to understand their risk exposure – because it is buried in the documents. With the Topla product and experts, direct the tool to ‘an unknown’ with millions of documents will net ‘a known’ – assessing what is happening. A measure of risk and what to do about it.