REUTERS - AT&T Inc said on Wednesday it expects revenue, earnings and free cash flow to grow through 2018 but sees higher capital expenditure following its DirecTV purchase and investments in Mexico.
AT&T shares fell about 3 percent to $33.63 in afternoon trading. Through Tuesday’s close of $34.65, they had risen 3.2 percent this year.
The U.S wireless carrier said it expects revenue to grow in the double-digit range for the rest of 2015. The company, which previously forecast capital expenditure of about $18 billion, said it sees that rising to about $21 billion, including integration costs.
AT&T, which closed its $48.5 billion acquisition of DirecTV in July, forecast 2015 adjusted profit of $2.62 per share to $2.68 per share. Analysts on average were expecting a profit of $2.60 per share, according to Thomson Reuters I/B/E/S.
As the U.S. wireless market reaches saturation, AT&T hopes to tap into DirecTV’s business and has been expanding its wireless operations in Mexico to grow revenue.
AT&T also plans to deliver video content through ad-supported TV streaming and mobile video products while building out its advertising technology to unlock new revenue.
The newly expanded AT&T leapfrogs the biggest U.S. cable company Comcast Corp. The company serves more than 26 million U.S. customers and more than 19 million in Latin America, making it the world’s biggest pay-TV company.
The No. 2 U.S. wireless carrier has bundled its wireless service with DirecTV’s pay-TV offerings to cross-sell products across its expanded customer base.
The new packages, which were rolled out on Monday, have “exceeded sales expectations on launch,” chief executive Randall Stephenson told analysts at a conference without providing details.
On Wednesday, the company maintained its forecast of $2.5 billion or more in cost savings or synergies from the DirecTV deal on an annual basis through 2018.
In response to an analyst’s question about whether AT&T’s cost-savings forecast was conservative, chief financial officer John Stephens said he had to factor in foreign currency fluctuations in DirecTV’s markets such as Brazil and Venezuela.
The target of $2.5 billion in cost savings is achievable and “it could break to the upside,” chief executive Stephenson said.
The company is “creating a new category” of combined wireless and TV services and that’s why the cost-savings goal did not include new revenue opportunities, such as cross-selling products, he said.
Reporting By Malathi Nayak in New York and Lehar Maan in Bengaluru; Editing by Sriraj Kalluvila and Andrew Hay