Unclear Fate for AT&T/TW and Other Media M&A in Trump Administration

Despite Trump having said on the campaign trail that he opposed AT&T/TW (see 1610220002), he and Congress, which remains under GOP control, are less likely to block such deals or impose as stringent conditions as a Clinton administration would have, Free State Foundation Randolph May told us. "I think the administration ultimately will be more likely to see the pro-competitive aspects of mergers. Despite any pre-election rhetoric on either side, a Clinton administration by its disposition would have been more likely either to block the merger or ... impose more stringent conditions." Ergen said during the company's Q3 earnings call that while Trump had been against AT&T/TW, "Any candidate reserves the right to change their mind."

The incoming president's campaign comments likely change how AT&T and TW approach regulators, BTIG's Greenfield wrote investors. While the companies were probably already prepared to challenge DOJ in court to get deal approval, "the odds that becomes necessary may be higher now," Greenfield said. While a legal case for blocking the deal isn't clear, he said, Trump's campaign trail comments and his dislike of TW's CNN means less likely regulatory approval. And Jeffrey Eisenach, American Enterprise Institute director-Center for Internet, Communications and Technology Policy who is helping on telecom policy for the Trump transition team (see 1611090038), has said Republicans aren't totally hands-off regarding antitrust policy, Greenfield said.

The TW deal "is all about innovation and economic development, consumer choice, and investment in infrastructure with regard to providing a great 5G mobile broadband experience," said AT&T Chief Financial Officer John Stephens during a Wells Fargo investor conference Wednesday. "So we look forward with optimism to working with the leadership and providing benefits to consumers and to our shareholders.” Stephens said the company still is determining what licenses might transfer as part of the deal and thus whether FCC regulatory review would be required. There have been questions whether the FCC would have any regulatory oversight of AT&T/TW due to license transfer issues (see 1610260022). Stephens said AT&T was optimistic about the prospects of DOJ approval since the department historically has approved vertically integrated transactions.

Whether AT&T/TW goes through FCC review could largely dictate whether the telco proposes any voluntary conditions, experts and interested parties tell us. Avoiding FCC review is almost surely AT&T's chief goal, since that agency's public interest standard for review could bring about more and different conditions than an antitrust review by DOJ alone would, a lawyer with cable clients and deal experience tells us. An FCC proceeding would be public and on the record and subject to the agency's public interest test -- that third point meaning that "while competition issues are important, so are other consumer protection issues that are part of the FCC's mission," Public Knowledge Senior Staff Attorney John Bergmayer emailed us. A lawyer with cable clients said it would be surprising if the FCC used transfer of operational licenses as justification for reviewing the transaction since those often are transferred without any review, just a notification to the agency.

The carrier may be somewhat less likely to offer any conditions if Justice has sole review over the proposed $108.7 billion transaction, given that DOJ can be more skeptical of conditions, industry officials said. The company might be motivated to accommodate Justice by making commitments on issues it knows the agency cares about, like interconnection, they said. It also would be unlikely that data caps don't get addressed in any DOJ consent decree, making them also a likely item for voluntary concessions, they said.

A cable lawyer said that while zero rating is expected to be a key regulatory focus (see 1611020034), big data could also be a sizable issue, especially the issue of whether TW access to AT&T customer data could give it a leg up on competition. While antitrust authorities have batted around big data issues, they haven't had an opportunity to tackle it in a transaction, and AT&T/TW could be that vehicle -- especially if DOJ sees a transaction-specific competitive harm regarding big data, the lawyer told us. The EU has looked at similar issues in recent years, such as Google's purchase of DoubleClick in 2008 (see 0803120110), though no regulator has blocked a deal because of big data issues, the lawyer said.

Justice could end up speaking to hundreds of companies to get input on how AT&T/TW might affect them or their industries, stakeholders said. Some parties could end up conspicuous by their reluctance to say much, such as HBO -- owned by TW -- and Hulu -- in which TW bought a stake earlier this year (see 1608030033), they said. The number of interested parties that look to be active in a DOJ-only review also could be limited by antitrust laws that require they present a case and analysis showing how AT&T/TW would cause anticompetitive harms, unlike the more-open FCC proceedings, noted a lawyer with cable clients.