AT&T suggests Dish and DoJ are collaborating

With AT&T’s WarnerMedia and Dish arguing over a distribution deal, one AT&T executive has suggested Dish and the Department of Justice are collaborating to reverse the green light on the Time Warner acquisition.

The conspiracy theory is hitting new highs here. AT&T is effectively accusing Dish of actively working to create a no-deal situation in negotiations with WarnerMedia over rights to air HBO content. Although having HBO and Cinemax channels go dark on the Dish service would have a negative impact on business, it does coincidentally work well for the Justice Departments case appeal against the Time Warner merger.

WarnerMedia have been in negotiations over the right to air content, with it claiming it offered to extend the previous contract while negotiating but Dish declined. As a result, HBO content has disappeared from the Dish service.

“Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement,” said Simon Sutton, HBO President and Chief Revenue Officer, in a statement to Reuters.

With the appeal based on the grounds the AT&T acquisition of Time Warner would offer it undue control and influence in the industry, stagnant negotiations certainly add credibility to the objections from the Department of Justice. Manipulating the playing field however, as AT&T is accusing Dish of, is a serious no-no when it comes to the courts.

“This behaviour, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” said a representative of the Department of Justice. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

“The Department of Justice collaborated closely with Dish in its unsuccessful lawsuit to block our merger,” WarnerMedia responded. “That collaboration continues to this day with Dish’s tactical decision to drop HBO – not the other way around. DOJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

The $85 billion acquisition of Time Warner proved to be a messy affair for AT&T. While some would have expected some resistance from the industry, the objections of President Trump seems to have encouraged the Department of Justice to chase down every lead, and make life as difficult as possible. The Department of Justice’s appeal against the approval of the deal, is effectively built on the assumption Judge Richard Leon didn’t know what he was talking about.

Publicity stunt? Monopolistic ambition? Nefarious schemes? Whatever the basis of this story, more fuel has been added onto one of the longest running sagas in the telco industry.

CWA, Dish and Altice USA join the T-Mobile/Sprint opposition

With conflicting predictions on the outcome of the industry’s biggest will-they/won’t-they flying everywhere, opposition to the deal from a communications union, Dish and Altice has started to scrap for attention.

The Communications Workers of America (CWA) union, satellite operator Dish and MVNO Altice USA have all aired their grievances, as the industry seemingly turns against the prospects of reducing competition across the US. While we suspect politically-minded individuals actually care very little regarding the concerns of Joe Bloggs, enough resistance from corporations could certainly have an impact on the decision making process.

Mergers of this nature are particularly sensitive to authorities due to the direct impact on competition. The difficulty is focused around the idea of ‘public interest’, a loosely defined term which underpins opinion in a huge number of legal cases in the US. Unfortunately for the US and its citizens, the definition of ‘public interest’ can depend on numerous factors and is rarely 100% consistent.

Looking at the opposition raised in recent days, the focus seems to be around three themes; competition, national security and jobs. Competition is the main focus here, so will get the lion’s share of attention.

When looking to raise support for the transaction, T-Mobile and Sprint executives have pointed towards the idea of consolidated networks and more efficient supply chains to bridge the gap created by AT&T and Verizon at the top of the communications rankings. According to Dish and the CWA, this is nothing more than hot air, as neither organization needs the merger as a means to provide 5G services or could not exist without the deal. As 5G services would be brought without the proposed tie-up, the public interest aspect is questioned as why would it be logical to remove a fourth player.

Another interesting point is the spectrum screen. The FCC gets very fidgety when one telco controls more than 33% of available spectrum in a given region, though should the deal go through, this would be the case across 66% of the US, a landmass which acts as home to 92% of US citizens according to the CWA. Altice USA believes one of the conditions of the deal should be the divestment of spectrum which exceeds the screen, as well as the associated network infrastructure, to improve opportunities for MVNOs and smaller telcos.

But perhaps the most important assertion here is the prevention of competition. Dish has stated the tie up would possible prevent it entering the wireless market with its own offering, while Altice USA has expressed concerns over whether the new organization would honour its own MVNO agreement with Sprint. Altice USA has said it is on track to launch an offering in 2019, though there have been no guarantees its ability to compete would not impaired by the transaction.

Predictions on whether reducing the number of wireless operators from four to three vary quite considerably, though there will certainly be concern if MVNOs start rowing backwards due to the deal. Taking Sprint out of the equation is one problem, but MVNOs disappearing will have another painful impact on competition.

Dish argues customisation of radios, chipsets and devices by the new organization would prevent it from entering the 5G mobile voice/broadband market, or at the very least delay it. Altice USA has pointed to comments from T-Mobile US CEO John Legere, which it believes demonstrates hostility towards MVNOs. Finally, the CWA has suggested the removal of head-to-head competition between the pair would be detrimental, while each has a viable future in the 5G world as a standalone business.

Looking at the other arguments, there seem to be less credibility. On the jobs front, the CWA predicts under the proposed terms of the transaction, 28,000 jobs would be sacrificed. 12,600 would be in the postpaid business, 11,800 in the prepaid and 4,500 in head office roles. As with any merger, there will certainly be crossover and therefore redundancies, though considering the combined workforce of the two organizations is in the region of 80,000-90,000, we can’t imagine redundancies will be as high as 33%.

In terms of national security, the CWA suggests Softbank is too close to Huawei and ZTE. The union quotes Sprint executives, claiming they have praised the technology of the two vendors, though this is hardly a surprise; many telcos around the world have paid compliments to Huawei in particular for the excellence of products, customisation and account management capabilities. Huawei is the market leader for communications infrastructure for a reason.

The national security argument seems to be nothing more than a shallow attempt to rile paranoid politicians who already have a Chinese bee in their bonnet. The link appears to be a smear attempt, attributing comments which are far from uncommon to a single business. It is an underhanded move and undermines the credibility, assuming it has much, of the union.

Although we do not see much substance to the employment and national security arguments, the competition concerns from all three are somewhat justified. Authorities will certainly have some alternative ideas to consider and it tough to see how this merger will be approved within the 90-day targeted window.