AT&T-Time Warner merger delivers rude reality check

One of AT&T’s (T) biggest promises during the battle for Time Warner was lower prices that the merger would bring about. However, a fortnight later, the reality is different. AT&T is hiking the price for many of its offerings, including its DirecTV Now streaming plans. The Justice Department had argued all along that price increases would be inevitable but that argument failed to prevail.

AT&T had promised that post the merger with Time Warner, prices would come down and it would have opportunities to offer more innovative products. Apart from DirecTV, AT&T has hiked prices for some of its other services and plans too and one of the reasons for this could be that the company is looking for fresh revenue streams post the costly merger which has increased its debt load.

Now that AT&T owns Time Warner, it does not have to negotiate with third parties for the content it provides. AT&T introduced a new unlimited wireless plan which includes its WatchTV streaming service. As the other providers are coming up with new channel bundles, the competition is likely to tighten not only on pricing but on the size and content of these bundles.

The Dallas-based conglomerate’s scale allows it to spread the costs wider among its large customer base that helps to improve profit margins and get better returns on invested capital. Although the AppNexus acquisition will bring in advertising revenues for AT&T, cord-cutting is likely to put pressure on the telecom giant’s pay-TV revenues. However, with its wireless capabilities, Time Warner programming and AppNexus advertising platform all rolling together, it looks like AT&T will not just prevail but see strength going forward.

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