Lawsuit Alleges AT&T Inflated DirecTV Subscription Counts To Mislead Investors

Shareholders have recently filed a complaint that media conglomerate AT&T has encouraged employees to create fake accounts for its DirecTV Now streaming service in order to inflate subscriber numbers in an attempt to mislead investors going into the acquisition of Time Warner.  The complaint is actually an amendment, filed last week, to an existing lawsuit. 

According to the original lawsuit, employees faced quite aggressive sales quotas and, as such, were “taught and actively encouraged” to convert as many $35 activation fees as possible. These activation fees are associated with upgrades from phones to the price of several DirecTV Now subscriptions.  Allegedly, these actions could be executed by “waiving the fee, but charging the customer anyway, and applying the payment to up to three DirecTV Now accounts using fake email addresses.”

In the complaint, the investors claim customers were never told about this upgrade and associated fee.  Furthermore, the suit also describes how the company has already received several complaints from customers who said they had been billed for these fraudulent accounts.  Finally, the complaint also details other potential methods for improving subscription numbers without prior consent from customers. 

The lawsuit continues to allege that these efforts intended to create the impression—albeit, a false one—that the service was attempting to compensate for steady declines in the company’s legacy DirecTV satellite business.  Also, the lawsuit insists that the efforts were a move to justify the company’s ambitious acquisition of Time Warner (WarnerMedia). 

All this in mind, Wall Street investment bankers are now suggesting that AT&T could simply sell off DirecTV or merge with Dish Network if they want to resolve this issue.  Essentially, the merge could then spin off the company (which would be similar to a sale) into a separate unit financed with capital provided by private equity firms, particularly since Dish is so much smaller than DirecTV (with barely 12 million subscribers).