AT&T accused over merger promises

Critics ask for DirecTV deal to be viewed in broad context

AT&T had a bad record of keeping its past merger-related promises, and politicians should be sceptical of commitments it was making to gain approval for its proposed acquisition of DirecTV, critics of the deal told members of Congress on Tuesday.

The $48.5bn deal, which combines the second-largest US wireless mobile carrier with a major satellite TV provider, is just one of several major transactions being considered by US regulators. Officials are also assessing the Comcast-Time Warner Cable tie up and could possibly soon be reviewing a potential deal between Sprint and T-Mobile.

As a result, critics of those deals and some members of the House Subcommittee on Regulatory Reform said the AT&T-DirecTV transaction should be viewed on its merits but also in the context of broad consolidation and transformation in the industry, which could harm consumers by reducing choice and increasing costs.

“Depending on the actions of [regulators], the telecommunications industry may experience significant change over the next year,” said Bob Goodlatte, chairman of the judiciary committee. “As the committee and the relevant government agencies examine the potential issues associated with the multiple proposed telecommunications mergers, we should be mindful that assuring the best interests of consumers is the ultimate goal.”

John Bergmayer, an attorney at Public Knowledge, the research group, said that in 2006, as part of AT&T’s deal with BellSouth, AT&T had promised to provide broadband to all the homes in its wireline footprint. But, by 2012, that commitment had not been met.

“Again and again, AT&T makes the same arguments and the same promises when it wants to acquire a competitor,” Mr Bergmayer told House members in the first Congressional hearing on the DirecTV deal. The Senate will hold a similar hearing this afternoon. “Yet no merger ever seems to be quite enough for it to achieve its goals, leaving AT&T ample headroom to re-promise and recommit to the same goals the next time around.”

Randall Stephenson, AT&T’s chief executive, denied those charges, saying the company had fulfilled all of its commitments. Mr Stephenson and Michael White, DirecTV’s chief executive, also touted their deal, saying it would reduce costs, boost competition and expand online access to rural customers, which is an important point to politicians representing those districts.

The DirecTV deal is AT&T’s big bet that consumers will pay for bundled television, mobile and broadband services amid a growing demand for video streaming.

“This transaction is about meeting consumer demand,” Mr Stephenson said.

During the hearing, Senator Richard Blumenthal said the claims made by the companies asked the public to make two huge leaps of faith: that the deal would bring cost savings despite rising content expenses and that those savings would be passed on to customers.

Mr Stephenson said content cost would be reduced by around 15 per cent because of the deal but it was difficult to say how much of that could be passed on to consumers because of the competitive environment, which evolves on a weekly basis.

Although the hearing in the Democratic-led Senate was more harsh than the proceedings in the Republican-dominated House, lawmakers overall were less sceptical than they were when similar hearings were held on the Comcast-TWC deal.

The stakes are particularly high for AT&T, which was embarrassed in 2011 when it had to drop its bid for T-Mobile amid opposition from regulators. Those same agencies, the Justice Department and the Federal Communications Commission, are reviewing the DirecTV deal.

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