AT&T Inc. (NYSE: T) reported earnings last week that the market apparently didn’t like. It took T stock down to 52-week lows. Yet, T stock earnings were decent — although neither great nor horrible. What everyone seems to be missing, however, is that this earnings report is literally irrelevant to the future of T stock.

That’s because the AT&T antitrust trial is come to its conclusion — and I simply do not see how the merger with Time Warner Inc. (NYSE:TWX) does not get approved by the judge. Sure, there may be a couple of conditions, such as a revised arbitration agreement, but this merger is going to happen.

Merger Changes Business Model

Consequently, the entire business model underlying T stock is going to change. As T stock CEO Randall Stephenson has repeatedly mentioned, the purpose of this merger is to develop enhanced advertising models. Consequently, T stock earnings are going to have a very different look going forward.

Not only that, the addition of Time Warner content is going to add an entire content creation division to the earning spread. Every aspect of the T stock earnings report is going to change. Trying to assess AT&T stock based on this earnings report is, frankly, kind of silly. Indeed, towards that end, I would consider the current AT&T stock price of $33 to be a bargain.

AT&T Earnings Report Was OK

T stock missed revenue estimates — on the face of it anyway. Then again, AT&T has missed revenue estimates for several years running. I’m also not going to complain about $30 billion in quarterly revenue, even if it was down $5 billion over last year. Cash from operations was essentially flat at $8.9 billion, and free cash flow declined by $200 million to $2.8 billion. There is plenty of free cash flow to cover the dividend.

The mobile division had what I consider to be a pretty decent quarter. Postpaid phone net additions grew 300,000, with record-low first-quarter postpaid phone turn of 0.4%. The number of prepaid phone net additions grew by 192,000 year over year, even though that number is trailing off in terms of year-over-year growth.

There’s been a lot of criticism regarding the DirecTV purchase, which has not currently been the accretive beast that T stock owners had been hoping for. Right about the time the merger was completed, DirecTV’s domestic organic growth had not only slowed, but was starting to decline. Latin America, however, was still doing rather well.

Bottom Line on T Stock

I think AT&T got caught with DirecTV right about the time cord-cutting began in earnest, and more streaming opportunities became available. However, AT&T needed a distribution platform for content. DirecTV was quite an asset at the time — and still is — despite subscriber defections.

However, those defections appear to be migrating into DirecTVNow, the company’s over-the-top service. Over the last four quarters DirecTV has shed approximately 730,000 subscribers, but the OTT service has gained more than a million.

If AT&T is smart, it will leverage the Time Warner side of the equation and start producing original content for DirecTV. This was something I suggested that the operator do years and years ago — even at a meeting there — telling them it was a necessity, and they still aren’t committing to it.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns calls on TWX stock. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.