SEC Filings

425
AT&T INC. filed this Form 425 on 12/06/2016
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And by the way, that 40 megahertz of capacity of spectrum is excluding the FirstNet bid, which is currently -- the government is in the process of evaluating. If we were fortunate enough to win the FirstNet bid that is another 20 megahertz of capacity that we could put to use both to deal with first responders as well as hailing this capacity.

So we feel like we are in a very unique place. So the question to us is, okay, we need to move into content, we need to begin delivering content in a mobile world, what content do we think is the place we want to be? And everybody has kind of gone different directions here. It has been interesting to watch how the industry has progressed here. And you are seeing a number of different moves, some have gone to very much an ad supported short form content and I think there is a place where that is going to be very relevant.

We have been unique in that we have consistently and strongly felt like people are over estimating the demise of premium long form content. We think we are in the golden age of TV and we don't see that changing. And that premium long form content on a mobile device is going to be a huge demand. And that was the driver behind doing a DIRECTV deal.

We did DIRECTV, not because we love satellite technology, but because it gave us access to some premium content and very quickly, we've been at it now a year and a few months. Shortly after doing DIRECTV we achieved some rather dramatic merger synergies from content savings, $1.5 billion a year of synergies we'll achieve this year. The key to that is it put us in the lowest content cost position we believe in the industry.

So we have the most content cost in the industry, number one. And the other thing DIRECTV gave us was the ability to get the content right to deliver all of that DIRECTV content to our mobile device very quickly. If you were a DIRECTV customer, one of our 25 million TV customers, you were able to stream all of your DIRECTV content including what was on your DVR to your mobile device. It has been huge.

We are very early on and in the month of October 40 million streams, 40 million streams of DIRECTV content were delivered to the mobile device and October was up from September -- one month over one month was up 40%. And this trend is continuing. And so, the customers are loving premium long form content delivered to a mobile device.

Now that is just step one. Step two is what we announced last week. DIRECTV also gave us the ability to negotiate pure over-the-top rights for this content, not just authenticated with your DIRECTV subscription, but getting over-the-top rights delivered to a mobile device.

DIRECTV NOW, we announced it last week, we launched it I think it was Wednesday of last week and John Stankey who runs this business, our entertainment group, gave me his forecast for how many subscribers we had added in the month of December. He achieved that forecast on Wednesday, okay. So this is a big runner.

So we have an offer, introductory offer, $35 for 100 channels and that includes your mobile streaming to your device; it does not count against your data bucket. This is really significant. Now it is early, we have no idea what the churn characteristics of this are going to look like so we are going to be cautious about putting numbers out. But the early demand has been rather dramatic. It has been really, really impressive, we have been pleased with it.

The other thing we have been pleased with are the attach rates of HBO and Cinemax, $5.00 you can attach HBO and Cinemax, we are getting really good attach rates for that service as well. And so bottom line, this thing is doing very, very well, it is exceeding expectations. And these two together, TV Everywhere with DIRECTV and DIRECTV NOW, you sit back and you ask, is there demand for premium long form content on a mobile device? We are of a mindset that ship has sailed, all right, yes there is significant demand for this kind of content.

And by the way, the DIRECTV now is way over indexing to people who live in MDUs, apartment complexes. So we know we are hitting a demographic that we like here. And so now just stop, do you want to own premium content? And we have concluded, yes, that makes a lot of sense. So the next logical step was Time Warner. That is a completion of a strategy.

And if you want to put together a global TMT leadership position, telecommunications, technology, entertainment, media, we think with Time Warner we have completed that strategy. So here is premium content, premium content that we are going to be able to iterate very quickly, do some new innovation in terms of how the content is delivered, integrating social media and so forth into the content. We are really excited about what putting all this together looks like.
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