AT&T hits DirecTV with class action

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AT&T shareholders, complaining that telco giant AT&T artificially “faked” inflated subscriber numbers, have filed a class Action. Also named in the Action is Jeff Bewkes, Time Warner’s CEO.

The action was filed in the Southern District of New York with various individual plaintiffs and pension funds, and demanding a jury trial. The Action centres on the July 2015 acquisition of DirecTV, and the subsequent registration and prospectus of its June 2018 $108 billion merger with Time Warner.

In essence, it is the shift from the conventional DirecTV pay-TV model to the lower-priced ‘NOW’ service that has created the action, and aggrieved its shareholders.  The action argues that AT&T falsely described DirecTV as a fast-growing product when the company knew that subscribers were in dcecline.

The filing states: “This deal put AT&T in a tenuous position as the world’s largest paid-TV provider, despite knowing this was “a business . . . in decline,” given the broad trend of declining subscriptions for traditional paid-TV (i.e., ‘cord cutting’).”

Subsequently, AT&T launched DirecTV NOW and said that “this ‘exciting product’ which would launch in Q4’16 with ‘100 plus channels at a very, very aggressive price point,’ low capital requirements, and reasonable profit margins. By mid-September 2016, news outlets were reporting that AT&T had plans for DirecTV Now to be its primary video platform.”

The action states that AT&T salespeople deliberately created false e-mail accounts, and created imaginary accounts to help boost subscriber numbers.


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