Politicians are voicing concerns over the acquisition

In the November 8, 2016, elections, Donald Trump became the next US president, and Republicans took control of both the Senate and the House of Representatives. Those events presented some uncertainty for media companies and, more specifically, lowered the probability of the AT&T (T)–Time Warner (TWX) deal being approved.

In his campaign before the election, Trump said at a rally that if he were elected president, he would be reluctant to approve the acquisition because it’s “too much power in the hands of too few.”

There’s a fear that AT&T’s acquisition of Time Warner could create a market monster. Also, Time Warner has a relationship problem with Trump because Time Warner owns CNN, which Trump has repeatedly accused of unfair news coverage.

Trump is generally viewed as favoring lower taxes, less government regulation, and minimal intrusion in business.

Trump Win Could Put a Cloud over the AT&T–Time Warner Deal

AT&T’s definitive agreement to acquire Time Warner is a stock-and-cash transaction valued at $85.4 billion for Time Warner. The deal would create a vertically integrated company with best-in-class assets in content and distribution that could help grow AT&T’s long-term earnings.

Creating new revenue streams

The graph above shows AT&T’s revenue in the past five quarters. AT&T reported revenue of $40.9 billion in 3Q16. The acquisition of Time Warner is seen as another attempt by AT&T to pursue revenue growth outside its traditional carrier business, where competition has become more intense.

Smaller carriers, including T-Mobile (TMUS) and Sprint (S), are going out of their way to provide hefty discounts in order to steal market share from their larger rivals. However, a Trump presidency could frustrate the company’s revenue diversification efforts.

The real motivation for AT&T acquiring Time Warner is that AT&T has been frustrated with lengthy negotiations in its attempt to acquire content from various content providers. A Time Warner acquisition would help solve this problem to a large extent, since acquiring Time Warner’s content would be a seamless process and less time-consuming.

AT&T believes that after a difficult regulatory review process, it will successfully complete its acquisition of Time Warner at the end of 2017.

Latest articles

On September 14, drones attacked Saudi Arabia Aramco's oil-infrastructure. Saudi Arabia's oil production has fallen by 50%.

Apple Arcade (AAPL) is a subscription gaming service that was unveiled at Apple’s annual event last week. The service will launch on September 19.

Cannabis legalization is gaining traction not only in the US but also globally. The third presidential Democratic debate was held on September 12.

Google has agreed to make a one-time settlement of over $945 million euros to the French ministry. The ministry accused Google of evading taxes.

In Q4 2018, legendary investor George Soros sold all his holding in Apple (AAPL). In Q3 2018, Apple represented around 0.2% of his total portfolio.

Jim Chanos, the founder and president of Kynikos Associates, is a long-time short-seller of Tesla stock. Tesla stock has fallen 17.5% in the last year.