AT&T’s price increases the result of billion-dollar merger debt

Adam Westlake - Feb 3, 2019, 10:15 am CDT
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AT&T’s price increases the result of billion-dollar merger debt

In the last several years, AT&T has made two huge acquisitions: DirecTV in 2015, and Time Warner in 2018. With these mergers — which were clearly anti-consumer — AT&T thought it turn itself from a telecom giant into a cable TV giant, with a near monopoly on the US’s media industry. But instead of just buying itself an undeniable advantage, the company has given customers more reason to leave by attempting to cover its immense debt with price increases.

A detailed report from Motherboard shows that AT&T’s acquisitions of DirecTV and Time Warner have resulted in $160 billion in debt over the last three years, with several Wall Street analysts noting that the company’s plans to recoup that debt — with price increases and fewer promotional discounts — are unsustainable, and in the end will simply drive away more customers.

With over 19 million customers currently, the DirecTV satellite service has lost over 1.4 million customers in the last two years. This week’s release of AT&T’s fourth quarter earnings reveals that 403,000 customers ended their subscription in just one quarter. DirecTV Now, AT&T’s own streaming video service that was launched as a cheaper alternative to cable TV and aimed at cord cutters, has also been hit hard, losing 267,000 subscribers last quarter, or 14% of its total.

Analysts believe it was last summer’s $5 price increase that prompted most of the DirecTV Now customer losses. And it seems those are the kind of changes customers can expect going forward, with AT&T CEO Randall Stephenson stating during the quarterly earnings call that “Our top priority in 2019 is driving down the debt from our Time Warner acquisition.”

When adding up AT&T’s other actions, like its campaign against net neutrality and other FCC protections, anti-competitive practices like zero-rating and sponsored data plans, and a reputation for terrible customer service, it’s easy to see why more and more subscribers are leaving. Raising prices might help with the debt in the short-term, but as the current trend shows, it’s only increasing the rate of customer defections.


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