This Is a Big Hurdle for TWX Stock
Time Warner Inc (NYSE:TWX) stock has been gaining over the past month, following the announcement of its deal with AT&T Inc. (NYSE:T).
The deal’s prospects have dimmed since the results of the U.S. presidential election came out. The skepticism arises from the fact that President-elect Donald Trump had openly criticized the AT&T–Time Warner deal, saying that “deals like this destroy democracy.”
But is a Trump presidency that bad for consolidation in the media industry? In an interview with CNBC yesterday, Liberty Media Group Chairman John Malone said that the AT&T–Time Warner deal is a great move for both parties, especially in a world increasingly cutting the cord. He further added that “The bigger opportunity is to make the content businesses more profitable and more certain.” (Source: “Liberty Media’s Malone: Time Warner deal gives AT&T ‘substantial diversification’,” CNBC, November 10, 2016.)
The deal gives AT&T Inc substantial opportunities to tackle the issues of cord-cutting and unbundling. Content has always been king, and more so in today’s environment as consumers flock to a variety of digital platforms for interesting content. This has been the reason behind the success of Netflix, Inc. (NASDAQ:NFLX).
Hence, companies have to adapt to changing consumer preferences. But the doubts over the deal under a Trump administration have been weighing on TWX stock, which is on a decline.
AT&T Inc is paying about $85.0 billion to acquire the media conglomerate with properties like HBO and CNN. The company is confident that the U.S. Department of Justice would approve it, as such a vertical integration has never been rejected in the past. Furthermore, the AT&T Inc CFO John Stephens said in an investor conference on Wednesday that he looked forward to working with Trump. If Trump softens his stance against the deal, it would give a big boost to TWX stock.
There is hope for the media sector merger deals, as the business community is optimistic about Trump. They are confident that Trump, as president, would be a different person than he was as a candidate. Trump may add a few conditions to the deal so it does not result in “too much concentration of power.” Trump has clear issues with CNN, and the companies would need to sort that out.
But it is likely that the deal will go through if AT&T can convince that such a move is beneficial for consumers and would not push up prices. This would buoy TWX stock again.