AT&T Cautions Wireless Industry’s Gains Will Slow

Investors and analysts have questioned whether AT&T and its peers can continue racking up new cellphone subscriptions at last year’s breakneck pace. Wireless companies have so far lured new clients with deep discounts on new smartphones and by spreading out the cost of the device subsidies over time.

AT&T finance chief Pascal Desroches said the company isn’t planning for the wireless industry to keep growing the way it has over the past year and a half, repeating warnings about overall demand that executives have issued since December.

“Overall, the market remains healthy,” Mr. Desroches said during Wednesday’s conference call. “We will continue to take share in a very disciplined way.”

On Wednesday, AT&T projected overall 2022 revenue will grow in the low single digits above last year’s $153.2 billion benchmark, which excludes the company’s already-divested pay-TV business. This year’s revenue target assumes a full year of WarnerMedia ownership. AT&T plans to divest itself of WarnerMedia before then, though its shareholders will retain a 71% ownership stake in the new company, which will be called Warner Bros. Discovery. The media division set a full-year revenue target between $37 billion and $39 billion.

The telecom company also forecast annual capital expenditures in the $20 billion range with free cash flow in the $23 billion range. AT&T expects to cut its annual dividend payment to between $8 billion and $9 billion after the separation of its media unit, down from the roughly $15 billion it paid out last year.

The Dallas company’s sale of its film-and-TV business extends a rapid-fire series of deals it launched in 2021 to wean itself off entertainment. The company last year closed the sale of a stake in DirecTV to private-equity company TPG, ceding operational control of the unit in the process. It also sold all of the pay-TV company’s operations in Latin America.

Under pressure from investors to show progress on its strategic shift, AT&T had already announced quarterly subscriber gains for its wireless phone unit and HBO division. Shares of AT&T, which fell 14% in 2021, had climbed nearly 8% so far this year before erasing their gain on Wednesday. The stock fell 8.4% to $24.25 in the session.

After issuing preliminary results earlier this month, AT&T on Wednesday reported a final net gain of 884,000 postpaid phone subscribers over the December quarter, leading the wireless industry. T-Mobile US Inc. TMUS -1.37% said it added roughly 844,000 of those subscribers over the same period. Verizon VZ -3.55% Communications Inc. said Tuesday it ended the quarter with a net gain of 558,000 postpaid phone connections.

AT&T previously reported that its HBO unit, which includes HBO Max, ended 2021 with 73.8 million subscribers world-wide. That figure topped the target of 70 million to 73 million subscribers issued earlier in the year. The HBO unit’s domestic subscriptions hit 46.8 million at the end of the year.

In the December quarter, AT&T’s overall profit rose to $5 billion, or 69 cents a share, compared with a year-earlier loss of $13.89 billion, or $1.95 a share. A $15.5 billion accounting charge from the write-down of the telecom company’s DirecTV unit skewed the year-earlier result.

Overall revenue fell to $41 billion from $45.7 billion a year earlier, reflecting the satellite-TV operations’ absence. Excluding the divestiture and other items, AT&T said it had adjusted earnings of 78 cents a share, topping Wall Street’s 76-cent forecast.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com