After disclosing a $3.2 billion stake in AT&T Inc. (NYSE: T) early last month, activist investor Paul Singer and his private equity firm Elliott Management sent a letter to company management outlining several problems that needed to be fixed. Since then, the two sides have been in discussions related to the changes Singer claimed would improve AT&T’s margins and boost its share price by 65%. Those discussions may pay off soon — or they may not.

That’s the gist of a Thursday report in The Wall Street Journal citing people familiar with the matter. While predicting that something may or may not happen is a lot like predicting that the sun will rise in the east, there are several wrinkles that make these discussions more interesting than they might first appear.

AT&T announced in late December that it would delay its third-quarter earnings announcement, saying the later day (October 28) was closer in time to WarnerMedia Day and the introduction of its new streaming service HBO Max. One of Elliott Management’s main beefs with AT&T was its $109 billion acquisition of Time Warner (now WarnerMedia), a deal for which Elliott said AT&T had yet to “articulate a clear strategic rationale.” It’s not clear that HBO Max will be an acceptable answer to that criticism, but scattering a few movie stars and entertainment bigwigs around can’t hurt.

Elliott’s case for changes to AT&T’s board was not helped by a comment from Wells Fargo analysts who said that AT&T was already pursuing many of Elliot’s suggested changes. Except, of course, changes to the board.

In its early September letter to AT&T, Elliott stopped short of demanding board representation, but the firm did say that “it may be beneficial to evaluate the addition of qualified directors with specific domain expertise and operating skills suited for AT&T’s challenges today.” The letter also claimed that Elliott had “identified several leading candidates” that it wanted to discuss with AT&T’s board.

Having a slate of board candidates should lead AT&T to infer that either Singer gets his way or Elliott launches a proxy fight. If all the distractions from running a satellite TV company, a media company and fighting off intense competition in the wireless phone business were not enough, the addition of a proxy fight could prove to be the tipping point for investors who want more performance and less turmoil rather than the current reversed ratio of less performance and more turmoil.

In other words, AT&T will concede a board seat or two (likely on an expanded board) and promise to do better. It’s either that or get embroiled in and distracted by a proxy fight that could cost several directors and executives their jobs. Accommodating Elliott would be AT&T’s least-bad choice.

AT&T’s stock traded up about 0.6% Friday morning, at $38.03 in a 52-week range of $26.80 to $38.75. The stock’s 12-month consensus price target is $36.50. AT&T pays a dividend yield of 5.4%.

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