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AT&T readies for revamped firm after sale of media unit

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FILE PHOTO: The AT&T logo is seen in a store window in the Manhattan borough of New York City
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By Sheila Dang

(Reuters) - AT&T Inc's WarnerMedia unit reported solid fourth-quarter revenue growth on Wednesday, helped by new customers for its HBO Max streaming service, but shares of AT&T fell 3% as the market absorbed whether its core wireless business could propel future growth.

After facing skepticism from investors over its expensive endeavor to become a media powerhouse, AT&T struck a deal to merge WarnerMedia with Discovery Inc, which it now expects to close in the second quarter.

The company will detail its plans to attract new types of wireless customers and how it will refine its brand post-WarnerMedia at a virtual analyst day in March, said AT&T Chief Executive John Stankey, during an earnings call with analysts on Wednesday.

AT&T will aim to have "a much more crisp and intense focus," on its core wireless and internet business, Stankey said.

Jonathan Chaplin, an analyst at New Street Research, wrote in a note on Wednesday that the rate of customer defections at AT&T increased "materially," and it remained a question whether the company could sustain its wireless customer growth.

Investors were also disappointed in AT&T's growth guidance for the communications business, Chaplin said in an email.

The company signed up 884,000 net new phone subscribers who pay a monthly bill in the quarter, in line with its preliminary result of 880,000 released earlier this month.

Rival carrier Verizon on Tuesday reported a better-than-expected 558,000 subscriber additions in its latest quarter.

Revenue at WarnerMedia, which houses premium TV channel HBO and streaming service HBO Max, rose 15.4% to $9.9 billion during the fourth quarter.

WarnerMedia CEO Jason Kilar said it was the business' highest revenue in its 99-year history, thanks to gains in streaming, the steady growth of its studio business and its game group.

"That's one indication that what we're doing is working and resonating with audiences around the world," he said in an interview with Reuters.

HBO and HBO Max together added 4.4 million subscribers during the quarter, drawing viewers with releases such as "Dune", "The Matrix" and the newest season of TV show "Succession".

Total consolidated revenue was $41.0 billion in the quarter ended Dec. 31, beating analysts' estimates of $40.44 billion, according to Refinitiv Data.

Excluding items, AT&T earned 78 cents per share, above analysts' average estimate of 75 cents.

AT&T has prioritized its fiber internet business as an area for growth, and said it added 271,000 net new customers during the quarter.

Including WarnerMedia and advertising business Xandr, AT&T now expects 2022 revenue growth in the low-single-digit percentage range.

The company expects annual adjusted earnings of between $3.10 and $3.15 per share in 2022, short of analysts' average estimate of $3.21.

AT&T, which faces fierce competition from rivals Verizon and T-Mobile US amid nationwide deployment of their 5G technology, forecast 2022 capital expenditure in the $20 billion range.

(Reporting by Richard Rohan Francis and Chavi Mehta in Bengaluru and Sheila Dang in Dallas; Additional reporting by Dawn Chmielewski in Los Angeles; Editing by Saumyadeb Chakrabarty and Bernadette Baum)