DirecTV and AT&T Make Their Case for Merger on Capitol Hill

1:45 PM PST 06/24/2014 by Paul Bond
AP Photo/John Raoux; AP Photo/Keystone, Alessandro della Valle, file
Randall Stephenson, left, and Mike White

Among other benefits, a combined company would have more leverage when negotiating programming deals, says AT&T CEO Randall Stephenson.

The chief executives for DirecTV and AT&T appeared before judicial committees for the U.S House and Senate on Tuesday to inform lawmakers that if the two are allowed to proceed with their proposed merger it will result in one very consumer-friendly company that will drive down prices at competitors and spur technological innovation.

Randall Stephenson, AT&T's CEO, also said it should be allowed to purchase DirecTV for $48.5 billion because its own video product is unprofitable largely because 60 cents of every video dollar goes to programmers. A merger with DirecTV would give the combined company the scale it needs to negotiate better deals with the companies that provide TV content, he said.

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He also said a combined AT&T-DirecTV would "propel the development" of services like Netflix, Hulu and Amazon.com. As it is now, Stephenson said, DirecTV does not have a full range of interactive capabilities and mobile viewing, but it would once combined with AT&T.

The CEO promised the merger would create "a new competitor with unprecedented capabilities. And the substantial cost savings and other synergies associated with the transaction will allow us to price all of our services more competitively, which will drive cable and other competitors to lower their prices."

DirecTV CEO Mike White told lawmakers that it needs the merger in order to offer better bundles of services, and he informed them that competing companies oftentimes disparage DirecTV in their advertising.

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"We left satellite because they couldn't offer a really good Internet package," says one ad. "Are you missing out with satellite and slow DSL?" says another.

"If we want to compete effectively in today's Internet-driven marketplace, we must adapt," White said. "Broadband has supplanted video as the most important element in a customer's service bundle."

Along those lines, Stephenson promised that if the merger is allowed, within four years the combined company would expand its broadband service to at least 15 million customer locations across 48 states, mostly in underserved rural areas.

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While members of Congress have no official role in granting permission for the merger, they are expected to influence members of the FCC and Justice Department who do. Regulators are also considering the proposed merger of Comcast and Time Warner Cable.

Stephenson seemingly alluded to Comcast-TWC when he said on Tuesday: "This transaction is unlike most mergers because it primarily combines complementary products and capabilities. As a matter of economic theory and business reality, when complementary providers join forces, the net result is downward pressure on prices and increased incentives to invest in innovation, integration and infrastructure."

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