AT&T Inc. (NYSE:T) offers little in the way of video services while it connects millions to the Internet each day. DirecTV (NASDAQ:DTV), on the other hand, has a massive satellite presence without any offerings in broadband. For this reason, the two are looking to merge and are using that understanding to rubbish talks of anti-trust concerns.
Both the House and the Senate’s anti-trust panels are meeting today in back-to-back hearings that will feature the CEOs of both companies as well as academics, cable television rivals (Comcast) and public-interest groups.
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AT&T’s deal with DirecTV vs others
At the same time that Congress is convening to discuss the issue, Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) will be weighing in while also in acquisition talks with Time Warner Cable Inc (NYSE:TWC). The Time Warner Deal is believed to be around $45 billion or $3.5 billion below the proposed AT&T Inc. (NYSE:T) deal. It’s also quite possible that Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) will be announcing a merger of their own that will certainly be accompanied by additional anti-trust hearings.
When companies of this size look to merge, these deals will always face scrutiny. “This proposed deal fails the antitrust test, it fails the public interest test, and it raises many concerns,” said John Bergmayer, a staff lawyer at Public Knowledge who testified at this morning’s House hearing.
“AT&T and DirecTV directly compete in more than 60 local TV markets,” Mr. Bergmayer said. “It’s hard to accept AT&T’s claims that buying a direct rival can be good for competition.”
The aforementioned companies strongly disagree and stated in their regulatory filing that “The savings and synergies made possible by this transaction will fundamentally and permanently increase the incentives of the combined company to expand and enhance its broadband networks.”
Television writers are expected to testify against the merger as well believing that the merger would adversely affect the amount of money available for the creation of new content.
“It is a stated goal of the merger to reduce affiliate fees,” Christopher Keyser, president of the Writers Guild of America, speaking of the money that is kicked back to programmers.
“It is those fees that have fueled the recent boom in creative programming — particularly on cable,” Mr. Keyser said. “Reduce those fees through the outsized power of monopoly — and the result is less creativity, less product, less innovation.”
“We’re moving toward an industry with fewer competitors — where corporations are getting bigger and bigger, and gaining more and more control over the distribution of information,” said the deal’s most vocal opponent Sen. Al Franken (Dem-MN) in May, when the merger was first announced. “This hurts innovation, and it’s bad for consumers, who have been getting squeezed by higher bills.”
While most analysts see the move going through, Congress is a crazy place where surprises pop-up on a regular basis.