AT&T makes its case for DirecTV merger

AT&T Inc. said its growing power will be its customers’ gain.

The second-biggest U.S. mobile-phone carrier and operator of the television and Internet business U-verse is making its case before Congress today that its $48.5 billion takeover of satellite-TV provider DirecTV will lower prices.

“The substantial cost savings and other synergies associated with the transaction will allow us to price all our services more competitively, which will drive cable and other competitors to lower their prices,” AT&T Chief Executive Officer Randall Stephenson said in written testimony to be delivered to a panel of the House Judiciary Committee.

The committee is examining the implications of the AT&T deal announced last month, the latest in a string of industry acquisitions that stand to reconfigure U.S. telecommunications. Consumer groups have sought to block approval, saying AT&T has failed to show that combining with the nation’s largest satellite-television company wouldn’t harm competition.

“The proposed merger would remove a pay TV competitor from many local TV markets - a direct competitive harm,” John Bergmayer, senior staff attorney with the Washington-based policy group Public Knowledge, said in his prepared testimony for the hearing. “Yet it offers only to do some limited price- matching for three years.”

DirecTV is in every state, and AT&T sells U-Verse, its bundled broadband and television product, in parts of 21 states.

Bulking Up

AT&T would gain 38 million video subscribers in the U.S. and in Latin America to compete as cable-TV providers such as Comcast Corp. bulk up. Comcast, the largest U.S. cable-TV company, proposed buying No. 2 Time Warner Cable Inc. in February. In addition, Japan’s SoftBank Corp. is eyeing T-Mobile US Inc. after buying control of Sprint Corp. last year.

Stephenson and DirecTV CEO Michael White are also scheduled to testify today before the antitrust subcommittee of the Senate Judiciary Committee.

Members of Congress could raise objections about the effect of the merger on content providers and about the reduction of pay-TV providers in cities covered by U-Verse, Paul Gallant, an analyst at Guggenheim Securities, said in a research note.

The AT&T deal, like Comcast’s merger, needs approval from U.S. regulatory agencies that opposed AT&T’s unsuccessful bid in 2011 for T-Mobile, saying it would damage competition. Congress doesn’t have a vote on the mergers. It oversees the regulatory agencies, approving their budgets.

Open Internet

AT&T, in announcing its deal May 18, promised the new company wouldn’t raise rates for at least three years on stand- alone broadband service and DirecTV video purchased separately.

The Dallas-based provider pledged to roll out more high- speed broadband connections, a sweetener for the administration of President Barack Obama, which has made more broadband a policy priority.

AT&T said it will commit to abiding by the principles of net neutrality for three years, meaning it won’t block websites or selectively speed or slow Internet traffic.

The Federal Communications Commission is writing new net- neutrality rules to replace regulations it passed in 2010 that were rejected by a court this year.

DirecTV, based in El Segundo, California, is the largest U.S. satellite-television company.

This story was originally published June 24, 2014 at 10:02 AM with the headline "AT&T makes its case for DirecTV merger."