AT&T Inc. (T Stock) Likely to Take a Breather
AT&T Inc. (NYSE:T) looked like it was well prepared to face the U.S. Senate on Wednesday. However, things do not appear to be running smoothly for the AT&T-Time Warner deal. T stock had gained almost three percent on Wednesday, but it may come under pressure going forward.
AT&T CEO Randall Stephenson and Time Warner Inc (NYSE:TWX) CEO Jeff Bewkes defended their proposed $85.4-billion merger to lawmakers on Wednesday.
The senators asked some tough questions and discussed the issues surrounding such a mega-merger. Senator Amy Klobuchar, the ranking Democrat on the panel, expressed concern that the deal would create incentives for AT&T to refuse to license Time Warner’s movies and television shows to competitors. She also said that AT&T could favor its own shows over independent content. (Source: “AT&T touts Time Warner merger at U.S. Senate hearing,” Reuters, December 7, 2016.)
Democratic Senator Richard Blumenthal said he had “serious concerns about this transaction. I have yet to be convinced that the benefits outweigh the risks.” T stock is likely to get hit until more clarity emerges on the future of the AT&T-Time Warner deal.
Indeed, the benefits of the deal still remain hazy. Take the case of fostering more innovation, as claimed by Randall Stephenson. Many are not convinced that the merger would lead to more innovation. A simple content partnership should be able to meet that goal.
There are more chances that it will make things tougher for the competition, as well as for consumers. These doubts are going to linger on for a while, and will likely affect AT&T stock.
The key takeaway from the hearing was that the senators leaned more toward fact-finding rather than being swayed by the opinions of Donald Trump. Even though Trump looks like the bigger hurdle to T stock and the AT&T-Time Warner deal, the senate raised some tough questions about the synergy of the deal. AT&T CEO Randall Stephenson, together with Time Warner CEO Jeff Bewkes, tried to convince the senate, but did not quite achieve that goal.
AT&T stock has had quite a good run in the past, posting gains of about 23% over the past year as compared to the 10% gains posted by the S&P 500 in the same period. Although the two CEOs are optimistic, it might be a long road ahead for the merger, and the price of T stock is likely to pause for now.