updated 01:16 pm EDT, Wed June 4, 2014
None of the savings likely to be passed to customers, will fund expansions
In the controversial process of merging with DirecTV, AT&T will have to file a great deal of regulatory paperwork with the federal government. One such document to the Securities and Exchange Commission (SEC) has revealed that AT&T believes it can save 20 percent on the cost of acquiring programming for its users. These savings are unlikely to be passed to the customer, and instead will be intended to fund rural broadband programs and other expansions planned by the mega-corporation, should the merger be approved.
AT&T believes that the 20 million customers it will get from DirecTV will give it added leverage over content providers to sell programming at a lower rate. Less clear is how the content providers will react to a loss in revenue from this discount.
In the filing, AT&T claims that it expects "cost synergies to exceed $1.6 billion annual run-rate by three years after closing," meaning that it expects to save this much per year as a result of the merger. It sees the "synergies" coming from "programming cost reductions, operational efficiencies and reductions in redundant broadcast infrastructure."
The filing also spells out what the company believes to be "tremendous consumer benefits" and give consumers a larger array of products to bundle at one time, with one vendor "giving customers what they want -- an integrated bundle of video, broadband, mobility and other services."
Under terms of the $49 billion buyout agreement, AT&T will expand broadband service to an additional 15 million customers in many areas where AT&T doesn't have a presence currently. Stand-alone broadband and DirecTV packages will still be available for three years after the closing of the deal, keeping the company from requiring that customers pickup the new company's services together. Pricing will also be the same for three years under the agreement.