Is Trump’s Victory a Death Sentence for the AT&T-Time Warner Deal?



Time Warner’s relationship problem with Trump

AT&T’s (T) proposal to merge with Time Warner (TWX) could be dead on delivery, now that Donald Trump, who has opposed the transaction, is ascending to power. Trump said at a rally that he would reject the deal if he were to be elected US President, and his campaign echoed the sentiment saying, that Trump “would never approve such a deal because it concentrates too much power in the hands of the too and powerful few.”

Besides the fear that the merger could create a market monster, AT&T’s acquisition target, Time Warner, also has a relationship problem with Trump, because Time Warner owns CNN, which Trump repeatedly accused of unfair coverage.

If Trump maintains this hostile position, the AT&T-Time Warner could fail. AT&T agreed to pay $85.4 billion for Time Warner, making it the largest buyout deal so far in 2016.

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Creating new revenue streams

AT&T is pursuing Time Warner to create new revenue streams outside its staple wireless business. Competition has intensified in the wireless market as smaller rivals T-Mobile (TMUS) and Sprint (S) employ aggressive marketing techniques to steal customers from AT&T and Verizon Communications (VZ).

With Time Warner, AT&T saw an opportunity to bring important content in-house that it could help it differentiate its media operations and keep the cost of running the business low. The carrier has created a video streaming service called DIRECTV Now, inspired by the acquisition of DIRECTV.

Telecom companies are buying media assets as their staple market matures and growth becomes more difficult. That’s why AT&T is after Time Warner, but a Trump presidency could frustrate the company’s revenue diversification efforts.

But AT&T Chief Executive Officer Randall Stephenson has said that as a company, AT&T is ready to work with Trump. If AT&T insists on acquiring Time Warner, perhaps Stephenson would have to show Trump how AT&T would help “Make America Great Again.”


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