AT&T wouldn't let phone rivals run ads on its DirecTV; then, tiny Mint Mobile cried foul

Randall Stephenson, CEO of AT&T
Martin Simon | CNBC
Randall Stephenson, CEO of AT&T

The CEO of a small wireless carrier that offers consumers an alternative to the major cell phone companies says AT&T refused to run its ads on AT&T's DirecTV service as a way to suppress competition with the telecom giant's own wireless service.

AT&T, which is fighting an anti-trust suit brought by the Department of Justice that aims to halt its $85 billion acquisition of Time Warner, now says it's changed the policy that kept Mint Mobile's ads off its pay TV service.

The dust-up, in a corner of the business world consumers rarely get to see, shows some of the conflicts that can arise as the nation's largest telecom and media companies pursue deals that touch multiple aspects of consumers' digitally connected lives.

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Mint CEO David Glickman says in early May, the Costa Mesa, Calif.-based start-up was in the late stages of finalizing a deal to air TV commercials on DirecTV during the NBA playoffs.

At the last minute, Glickman alleges, Mint's $500,000 to $1 million ad buy was blocked because DirecTV did not want to promote a competitor on the service.

Emails that Mint shared with USA TODAY appeared to back Glickman's claim. In the first, which was sent on May 9 at 10:37 AM, Mint's ad representatives were warned by their DirecTV counterparts "that there may be an issue with this product due to direct competition."

A follow-up came shortly after at 10:52 AM: "Another update—we just got word from S&P (standards and practices) that unfortunately this is in direct competition and that we'll be unable to air this. Sorry about that."

Subsequent communications between the company buying media on Mint's behalf and AT&T/DirecTV took place over the phone on Monday. Word came back that the "official/unofficial policy" of DirecTV was to not take on any competitors of AT&T, including T-Mobile, Sprint and Verizon, according to notes of the conversation that were taken by an executive on the call, and also later shared with USA TODAY.

AT&T, contacted by USA TODAY Wednesday, says it is altering that policy, which it claims has been evolving for a while and was not made either in response to Mint or the pending Time Warner acquisition.

"While it has been common practice in the industry not to sell ads to your competitors, we have changed our policy to accept advertising competitive to our internal brands," the company said in a statement issued to USA TODAY.

AT&T, which counts about one-third of Americans among its wireless customers, must persuade the court its deal for buying media powerhouse Time Warner will help consumers. The Department of Justice has sued to stop it, claiming a combined AT&T-Time Warner could withhold its Turner networks or HBO from other pay TV services, demanding higher fees, which would lead to higher bills for consumers.

AT&T has countered that with Time Warner in the fold, the bigger company could better compete against emerging tech rivals such as Netflix and Amazon.

Mega-mergers are roiling the telecom industry — both deals like AT&T and Time Warner, which would link a huge telecom company with a major entertainment concern — plus the merger of No. 3 and 4 wireless carriers, T-Mobile and Sprint.

Mint is one of a handful of MVNOs (mobile virtual network operators) that piggyback off the major carriers networks — in Mint's case, T-Mobile. These wireless resellers generally offer cheaper rates to customers who prepay for their service. Some in the industry, such as the founder of Sprint-owned Boost Mobile, have warned the T-Mobile-Sprint deal could limit consumer choice. Glickman, who was scheduled to testify in Washington, D.C. Thursday on T-Mobile/Sprint, says Mint supports that deal.

But he's worried about AT&T having too heavy a grip over what can run on networks should its own deal go through — possibly to the detriment of AT&T's wireless rivals.

"I did not have a dog in the race on the AT&T-Time Warner (merger)," Glickman says. "Now suddenly I do."

If the merger is approved, "AT&T is about to own TNT…. I do have a problem with AT&T buying up all the ways for others to advertise a better plan."

Mint's first preference was to run ads advertising its $15 a month plan ("Mint Mobile took what's wrong with wireless and made it right") on DirectTV because of the costs.

Glickman said buying a 30 second national spot on TNT — a unit of Time Warner's Turner Broadcasting system that was airing the playoffs, as was ABC/ESPN — would have cost Mint about $250,000. By contrast, a more limited buy on DirecTV would cost Mint just $60,000.

Mint was turned down after telling DirecTV that it wanted to upfront for the ads, Glickman said.

Instead, Mint decided to run ads during the NBA pregame show on TNT, which draws a far smaller audience.

AT&T has been accused of similar practices in the past. In 2015, a few months after AT&T's buy of DirecTV closed, Sprint took out full page ads in several newspapers including USA TODAY after the company was told it couldn't run commercials on DirecTV that promoted a free year of wireless service to customers who defected to Sprint.