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The lawsuit claims AT&T created fake accounts to show DirecTV Now subscriptions



According to the lawsuit, employees facing aggressive sales quotas were "learned and actively encouraged" to convert $ 35 activation fees that customers pay to upgrade their phones to the cost of multiple subscriptions to DirecTV Now. This is alleged to have been accomplished by "waiving the charge but charging the customer anyway and applying payment to up to three DirecTV Now accounts using fake email addresses."

The complaint alleged that customers were not reported to have been signed up for a subscription, and it is said that the company sent regular complaints from customers who claimed to have been billed for accounts they did not sign up for. The complaint also describes other alleged methods of increasing subscriptions without the consent of customers.

The purpose of these efforts, the court argued, was to give the false impression that the service offset the decline in DirecTV's legacy satellite business and help justify the acquisition of Time Warner, now called WarnerMedia. WarnerMedia is the parent company of CNN.

CNN Business requested AT&T ( T ) to respond to the merits of the case and to comment on specific allegations therein, such as allegations that the company had pressured employees by setting aggressive sales targets, and employees were encouraged to use unrelated fees to create DirecTV Now accounts.

"We plan to tackle these unfounded claims in court," an AT&T response said.

Plaintiffs include Local 449, a Pittsburgh-based federal pension fund, and Melvin Gross, an investor who traded Time Warner shares for AT&T shares as part of the acquisition.

DirecTV Now, which AT&T launched at the end of 201

6, has been billed as a key part of the company's turn to entertainment. The lawsuit alleges that CEOs, including CEO Randal Stevenson, were fraudulent, claiming that DirecTV Now's growth was stable and that it was driven by "organic" demand and only limited promotions.

But beyond the supposed inflation of subscriber numbers for customer unintended costs, the service also suffers from significant turnover as customers leap from one discount to a streaming service to another, according to the complaint.

The complaint states that the plaintiffs and their attorneys spoke with a number of current or former AT&T employees who provided information about the alleged scheme. He cites a former Michigan employee who claims that about 40% to 50% of his clients, beginning in early 2017, complain that they have been billed for DirecTV Now subscribers for who stated that they had not registered.

The allegations come in which is for several reasons a delicate moment for the company.

Stevenson recently promoted WarnerMedia CEO John Stanky to a position that puts Stanky on the line to succeed Stephenson if he retires. (Stanki does not allege that he personally misled investors in the complaint, but the complaint states that he should have known that the investors were misled.)
WarnerMedia plans to launch its own streaming service, HBO Max, next year a market higher than many of its competitors, including Disney + and Netflix, will charge. And Elliott Management, a hedge fund activist that took a $ 3.2 billion stake in AT&T, is in need of change, including the eventual wholeness of DirecTV.

The company specifically called DirecTV Now in a recent letter to the AT&T board, calling the service "poorly performing" and pointing to its declining customer base.

At the end of the fourth quarter of last year, AT&T announced that DirecTV now had 1.6 million customers. There is 1.3 million as of July, according to the second quarter earnings report.
Speaking Tuesday at a conference at Goldman Sachs Communacopia, Stephenson responded to criticism that the company is too big and pays too much for its media business. It still "makes sense" for the company to have both a large wireless network and content, he said.

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