If DirecTV is unable to strike a deal with the National Football League to renew the satellite TV operator's contract to offer the popular NFL Sunday Ticket football package, AT&T Inc can pull out of the merger, according to a regulatory filing.
In a filing related to the merger, the companies said, "the parties also have agreed that in the unlikely event that the Company's agreement for the 'NFL Sunday Ticket' service is not renewed on substantially the terms discussed between the parties, AT&T (Dallas, TX, USA) may elect not to consummate the merger."
The current DirecTV (El Segundo, CA, USA) offer allows subscribers to watch football games outside of their local markets on Sundays. The exclusive package, which costs subscribers up to $300 a year, is an important tool for DirecTV to attract subscribers and the company has said about 2 million people receive the service.
Investors have been watching closely to see whether DirecTV would renew the Sunday Ticket contract with the NFL, estimated to be worth $1 billion annually, with the potential to rise in value as part of a new agreement.
The filing said that if a renewal isn't struck, AT&T will not be able to claim damages as long as DirecTV used its best efforts to get a deal done with the NFL.
On a conference call with analysts on Monday, DirecTV CEO Mike White said he and AT&T Chief Executive Randall Stephenson had spoken with NFL commissioner Roger Goodell as well as New England Patriots Owner Robert Kraft who heads the league's broadcast committee, and the parties were in "positive and constructive" discussions with the league.
"I am still highly confident that we are going to get our deal done," White said, adding he expects a pact to be agreed by the end of the year, which would be before the merger closes.
AT&T has said it expects the merger to take a year to close.
Representatives from AT&T, DirecTV and the NFL did not immediately respond to requests for comment.
A contract that renews DirecTV's exclusive deal would give the satellite operator a key marketing advantage over cable operators. Cable companies sought a deal in 2009, but DirecTV ended up renewing its agreement with the NFL for four years.
The current agreement is due to expire at the end of the 2014-15 season, meaning there is one season to go under the previous terms.
DirecTV shares traded down $1.90, or 2 percent, in early trading Monday at $84.30 while AT&T shares fell 74 cents, or 2 percent, to $36.