Donald Trump says he doesn’t think AT&T and Time Warner should merge. And Hillary Clinton might not want them to either.
No matter who our next president will be, regulators are likely going to be very tough on the $85 billion mega-merger.
The regulatory climate has intensified lately, with the Obama administration saying no to several huge deals. Scuttled tie-ups included AT&T and T-Mobile; Sprint and T-Mobile; Halliburton and Baker Hughes; and Pfizer and Allergan.
Still, regulators under President Obama have been relatively lax in approving mergers, compared to those working for Bill Clinton, the previous Democrat in the Oval Office. In fact, Hillary Clinton has expressed misgivings about the Obama administration’s approach to challenging mergers.
In an October 2015 op-ed in Quartz, Clinton promised to “beef up the antitrust enforcement arms of the Department of Justice and the Federal Trade Commission” if she is elected.
“I will direct more resources to hire aggressive regulators who will conduct in-depth industry research to better understand the link between market consolidation and stagnating incomes,” she wrote. “Ultimately, this will foster a change in corporate culture that restores competition to the marketplace.”
That doesn’t bode well for a mega-merger between AT&T and Time Warner that regulators likely have misgivings about already.
The Justice Department and the FCC have been heavily criticized over their approval of Comcast’s 2009 acquisition of NBC Universal. That’s the closest parallel to AT&T’s proposed blockbuster purchase of the parent company of CNN, HBO and Warner Bros., among others.
When approving the Comcast-NBC deal, the FCC and DOJ put in place certain conditions, including minimum broadband speeds and support for minority-owned cable channels, by which the newly merged company was supposed to abide. Those have proved difficult for regulators to enforce, and the company has been sued for violating the terms of its deal. (Comcast has called at least one of those suits “frivolous.”)
Credit Suisse analysts wrote in a note this week that they expect a “lengthy antitrust review” of Time Warner and AT&T — enough to give the companies pause about a potential merger. The analysts said the regulatory environment gives the deal an “uncertain outcome.”
The companies evidently disagreed — AT&T has to pay a substantial amount of money if the deal is blocked.
But Time Warner is decidedly different than T-Mobile or any of the other takeover targets that the Obama administration said “no” to.
“This is not the T-Mobile deal; there is no competitor being removed from the marketplace,” AT&T CEO Randall Stephenson noted during a conference call with the media. “Time Warner is a supplier to AT&T. It’s a classic vertical merger. They’re always dealt with by concessions and conditions — that’s what we anticipate happening here.”
Time Warner is also different than NBC Universal, in that it owns only a small handful of broadcast networks, and the companies have not yet decided if any of those licenses will be part of the deal. If they’re spun off, the FCC wouldn’t even need to be involved in the scrutiny of the merger.
In a press release, AT&T noted that one of the aspects that makes Time Warner an attractive asset is that its business “is lightly regulated compared to much of AT&T’s existing operations.”
The companies noted that they expect the transaction to close before the end of next year, following regulatory review.