Trump effect on AT&T and Time Warner deal

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With Donald Trump becoming the President of the US, the proposed $ 85.4 billion deal between AT&T and Time Warner may be in jeopardy.

The proposal by the telecom provider to buy the owner of HBO, CNN and the Warner Bros film studio was reported last month.

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On the same topic, Trump had conveyed his disapproval during a speech citing that “As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”

The shares of Time Warner fell soon after the result, while those of AT&T went up as a reaction of the electoral results indicating investor skepticism regarding completion of the transaction.

Analysts have predicted an immediate slowdown in mergers and acquisitions as companies and advisers wait and watch how the Trump antitrust enforcement policy will shape out.

The industrial community is currently awaiting the selection of the heads of representing the Justice Department antitrust division and the Federal Trade Commission, responsible for dealing with the M&A.

“I think a lot of deals will hit the pause button for a bit until we get some clarity on whether President Trump will moderate or be as disruptive as some expect. It’s going to be a tough environment for everything until we see how [Trump] behaves as a leader,” said a senior Wall Street banker.

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Though the law states that the President does not directly decide if a merger is illegal under antitrust law, the influence of the opinion of the President cannot be ruled out.

The mergers and acquisitions come under the U.S. Justice Department or the Federal Trade Commission, dividing among them the work of merger assessment.

When the agencies decide to stop a deal, the appointed judge has to agree for the decision to pass.

John Stephens, CFO, AT&T also conveyed that his company will look forward to working with Trump, while being optimistic about the regulators approving the deal.

“(Trump’s) policies had his discussions about infrastructure investment, economic development, and American innovation all fit right in with AT&T’s goals,” added Stephens.

The election results mean “increased risks” for the AT&T-Time Warner deal, Angelo Zino, analyst at CFRA Research, said.

“At the very least, there are going to be individuals put in place (by a Trump administration) that are going to make the deal a lot more challenging to complete,” he added.

AT&T offered $107.50 per share for Time Warner last month, aiming to acquire content to attract online customers.

It had conveyed that the Department of Justice will review the deal, which may face intense scrutiny.

Lawmakers are already concerned about the $30 million acquisition by the cable company Comcast of NBCUniversal.

“Candidates say a lot to help them win election, and when reality sets in, you have to see what they do,” said Josh Duitz, portfolio manager, Alpine Funds, owning AT&T shares.

The position of Trump was not perceived to be worse than Democratic nominee Hillary Clinton or President Barack Obama, with shares already trading at levels suggesting a roughly 30 percent chance of success, conveyed an anonymous investor.

The election results may further narrow M&A’s, signaling to investors previously believing them to be likely to close under a Trump administration.

Trump has also previously conveyed that if he is elected, his administration would look at breaking up the 2011 merger of Comcast and NBCUniversal.

The comments were unexpected by regulatory experts, as the previous record of the Republican government was in support of mergers and acquisitions.

Trump’s opinion to block the possible AT&T-Time Warner transaction comes as the direct opposite of the stand taken by President Obama.

President Obama and his administration had previously approved the Comcast deal, albeit with numerous conditions.

The deal, looked up-to be the biggest world in the year, may face tough regulatory scrutiny. This might result in less consumer choice and higher prices.

Vina Krishnan
editor@telecomlead.com

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