AT&T counting on DirecTV, expansion in Mexico for topline, bottomline growth

Despite escalating capital expenditure, the US-based wireless carrier AT&T is optimistic of achieving double-digit growth in revenues for the second half of 2015.

The earlier estimated capital expenditure of AT&T was $18 billion and is now increasing towards $21 billion including integration costs. With the US wireless market saturating, AT&T has decided to get into DirecTV's business in addition to expanding wireless business operations in Mexico.

AT&T is counting on this business strategy that will help it grow revenues and enhance profits. AT&T is also hoping to save $.5billion in costs as the synergies with DirecTV will benefit the company throughout 2018.

AT&T acquired DirecTV and made some investments in Mexico. After considering the possible rise in capital expenditure, AT&T forecasts that its revenues and free cash flow will continue to grow throughout 2018 continuously.

AT&T has launched the newly designed new packages on 10 August. The wireless carrier is receiving encouraging response for the new products. Randall Stephenson, CEO of AT&T, said: "The response exceeded sales expectations on launch."

The company released its financial outlook ahead of an analyst conference. AT&T completed the $48.5-bn acquisition of DirecTV in last July. According to the company's forecast report, it adjusted profit of $2.62 per share to $2.68 per share. This is more than the market expectation of $2.60 per share.

AT&T is second largest telecom company in the US after the US cable company Comcast. It has over 26 million customers and over 19million in Latin America. These numbers make it the largest pay-TV company in the world. The number two US wireless company AT&T is expanding the business operations after the acquisition of DirecTV in Latin America and posing major challenge to Comcast.

AT&T's business strategy includes buying mid-sized wireless carriers to strengthen business operations in Latin America. As part of the new business strategy, AT&T will provide video content through TV streaming and this will be ad-supported. The company will also offer mobile video products and is confident of churning new revenues stream for the company.

AT&T's CFO John Stephens says the forecast of cost savings to the tune of $2.5 billion was made on conservative basis as he took the forex fluctuations into consideration.

"The target of $2.5bn in cost savings is achievable and it could break to the upside," said Stephens.
AT&T factored in the currency exchange volatility in markets such as Brazil and Venezuela, where DirecTV has presence.

The synergy with DirecTV, AT&T is combining wireless and TV services and this is expected to provide more cost savings for the company. If new revenue opportunities including cross-selling products are considered, the revenues would be much higher for AT&T, said Stephenson. AT&T shares fell 2% to $33.90 on Thursday. The rise in stock price on Tuesday took it to 3.2% year-to-date (YTD) gain to $34.65.