AT&T Inc.

T 0.05{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436}

booked a $15.5 billion charge on its pay-TV business, reflecting the damage cord-cutting has taken on its DirecTV satellite unit even as the company’s HBO Max streaming service’s growth ramped up.

The write-down created a fourth-quarter loss as the media-and-telecom giant weighs the potential sale of its pay-TV assets and executives focus their investments on newer technologies. The company reported quarterly revenue declines in its legacy video and WarnerMedia units, offsetting gains in its core wireless phone division.

Executives called the write-down a sign of the pay-TV unit’s aging status as the Dallas company turns its attention to an internet-streaming model that gives WarnerMedia a direct line to its viewers.

“Our biggest and most important bet is HBO Max,” Chief Executive

John Stankey

said on a conference call Wednesday. Executives plan to expand the service’s footprint in other countries later this year and launch an advertising-supported version in the second quarter.

Overall, AT&T reported a fourth-quarter loss of $13.89 billion, or $1.95 a share, compared with a profit of $2.39 billion, or 33 cents a share, a year earlier. Revenue fell 2.4{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436} to $45.7 billion.

The coronavirus pandemic has strained the giant, pressuring revenue from cable networks like CNN and TBS throughout the year and closing many of the theaters that show its Warner Bros. films. Those pullbacks obscured recent gains in the company’s wireless service, which still generates more than half of the company’s profits.

The last three months of the year gave AT&T a net gain of 800,000 postpaid phone subscribers, a metric closely watched by Wall Street. Rivals Verizon Communications Inc. and

T-Mobile US Inc.

reported net gains of 279,000 and 824,000 such connections, respectively.

Revenue from AT&T’s WarnerMedia division fell 9.5{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436} to $8.5 billion as the show-business side continued to wrestle with low box-office revenue and weak advertising revenue. The HBO business grew and ended the year approaching 42 million U.S. subscribers, a figure that includes older cable plans as well as the new online service.

AT&T’s media division stunned Hollywood last year with a plan to release all of Warner Bros.’ 2021 movies on HBO Max the same day they hit theaters. Executives said the move would help the business cope with audiences reluctant to visit theaters during a pandemic while giving the studio’s sister streaming service an extra boost.

The online-only HBO Max service ended the year with 17 million activated accounts. It isn’t yet a year old but is competing in a crowded global streaming video marketplace where

Netflix Inc.

has already eclipsed more than 200 million subscribers world-wide and Walt Disney Co.’s Disney+ reached nearly 87 million subscribers in December.

Revenue from AT&T’s traditional video unit, which includes U-verse and DirecTV services, fell 11{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436} to $7.2 billion in the fourth quarter. The business ended the year with 17.2 million domestic connections, down from 20.4 million at the end of 2019.

AT&T has held deal discussions with suitors, including private-equity firm TPG, that valued the video business at more than $15 billion including debt. The fourth-quarter write-down reflects how the business has changed since AT&T bought DirecTV in 2015 for $49 billion, or $66 billion including debt.

The Wall Street Journal reported in August that AT&T had tapped bankers to explore a deal to take the fast-shrinking business off its books. The transaction could allow AT&T to deconsolidate DirecTV’s worsening financial results while retaining a stake in the TV giant.

The video losses have weighed on AT&T’s stock, which missed out the stock market’s rally. AT&T shares fell about 20{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436} last year. The shares were flat around $29.75 in early Wednesday trading.

The company projected stability for 2021, predicting core adjusted earnings in line with last year’s $3.18 per-share result and revenue growth around 1{960021229dc1dc07dce4932a9ddab0b26243ff9ca1f758a9c1fcae84a7a57436} with $26 billion of free cash flow. The company generated $27.5 billion of free cash flow in 2020, a figure executives highlighted as a sign of strength.

“The business core is going well,” AT&T finance chief

John Stephens

said. “That shows everybody the power of our resilient customer base. Cash isn’t fictitious, it’s real. As such, it’s a real arbiter of value.”

AT&T’s board last month declined to increase the quarterly dividend after 36 years of growing payouts. The payments to stockholders will still cost the company about $15 billion this year. The company’s recent financial forecast would allow it to continue paying that amount through 2021.

The company is entering the year with a slate of new leaders. Its longtime boss,

Randall Stephenson,

retired as chairman of the board earlier this month after stepping down as CEO in 2020. Mr. Stephens plans to retire later this year.

AT&T is now led by Mr. Stankey. WarnerMedia executive CFO

Pascal Desroches

is slated to take over as CFO later this year. Longtime director and former FCC Chairman

William Kennard

assumed the chairmanship.

Write to Drew FitzGerald at [email protected]

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