AT&T says as more customers purchase a mix of wireless and video services, it is not only lowering churn, but also increasing revenues for the overall wireless business.
Randall Stephenson, CEO and chairman of AT&T, told investors during the Goldman Sachs Communacopia Conference that it is seeing more of its existing wireless customers to purchase video and DirecTV video customers to purchase wireless.
“We’re beginning an effort to differentiate by virtue of multiproduct households,” Stephenson said. “If you’re in a household and you have our wireless service, there’s an all-out push to make sure you have our video products as well whether it is our premium DirecTV product or DirecTV now.”
Although Stephenson could not provide specific numbers on how much of its wireless and video customer base are bundling services, it is rising.
“The number of people that walk into one of our stores and add wireless services and the percentage of those that add some form of video into the household is really high,” Stephenson said. “We’re starting to have success on the DirecTV base adopting our wireless service and the whole point of this is multi-product households churn dramatically lower than single-product households.”
As a result of these bundling efforts, AT&T reduced churn in post-paid churn during the second quarter.
The carrier posted a net loss of 89,000 postpaid phone subscribers, down from 160,000 during the prior year and soundly outperforming Wells Fargo’s estimate of 275,000 net postpaid phone losses. Specifically, AT&T reported postpaid phone churn of 0.79% and total postpaid churn, including tablets, of 1.01%.
“Our churn is at record-low levels in our mobility business,” Stephenson said. “When you drive churn down in the mobility business, profitability jumps.”
But purchasing multiple services is only one part of the equation. Customers can use their DirecTV and mobile services to port video and other streaming services inside or outside of their homes.
One sign of that is AT&T’s DirecTV Now service. DirecTV Now allows customers to stream online or watch TV on-the-go with a smartphone or tablet. Customers can also connect a compatible device to watch on their TV sets.
“The market is responding and likes multiple products and the ability to integrate,” Stephenson said. “If you have AT&T mobility and DirecTV, you can take that content from the TV to the mobile device or the tablet.”
Broadening the base
AT&T is making other efforts to encourage a broader set of customers to bundle wireless/video services.
Beginning this Friday, AT&T will offer HBO for free to wireless customers who have AT&T’s $60 a month Unlimited Choice plan. For an additional $10, they can livestream 60 channels and access 25,000 on-demand titles with DirecTV Now’s “Live a Little” video package.
“This is how we move down market to get into some of the less affluent demographics by throwing in HBO free with our plans that target this segment of the market,” Stephenson said.
Stephenson added that AT&T plans to offer additional service bundles for this segment.
“After we close the Time Warner deal, we have some stuff queued up that will be interesting for this end of the market,” Stephenson said. “It will be a low-priced offering that bundles a nice package of content with connectivity as well.”