In an election campaign marked by populist fervor on the left and the right, Wall Street is increasingly worried that political opposition to AT&T’s $85.4 billion acquisition of TIme Warner is more than just election-year rhetoric and might actually derail the largest merger of the year.
“Nobody thinks either the Clinton or Trump administration will approve this deal next year when it is ready to close,“ said James Gryta, a portfolio manager at Einbender Capital.
Time Warner shares fell 3.1 percent and AT&T shares slid 1.7 percent the day after the deal was announced. Last week, the Macro Risk Advisors said Wall Street analysts gave the deal only a 28 percent chance of closing with the initial terms, according to the Wall Street Journal.
Wall Street is reacting to a rare example of bipartisan agreement this election season. Donald Trump has called the merger “too much power in the hands of too few.” Bernie Sanders called it “the latest effort to shrink our media landscape, stifle competition and diversity of content, and provide consumers with less while charging them more.”
While populist outsiders like Trump and Sanders might be expected to oppose the deal, opposition has spread to more centrist parts of the major parties.
“I understand why Mr. Trump is concerned,” said Philip Rosenthal, a self-avowed free market capitalist running on the Republican ticket against Democratic Congressman Jerry Nadler in New York. “We do not want to see massive amounts of content become captive to one distribution platform.”
While some politicians are using the merger to voice populist concerns over the consolidation of corporate power and deliver captivating election-year soundbites, some politicians have more specific concerns over the way the merger will affect the handling of consumer data.
Yesterday, Oregon Sen. Ron Wyden wrote a letter to the FCC to raise concerns about the way the merger “could dramatically increase the use of data caps and zero-rated content, two anti-competitive practices that harm consumers.”
Zero-rating refers to making certain content exempt from counting against a data plan, a practice which could allow data providers like AT&T to favor their own content.
While these issues were still theoretical during the regulatory examination of the eventually approved 2011 Comcast/NBCUniversal merger, opponents of AT&T’s acquisition can point to the Comcast deal for concrete examples of their concerns.
While the Department of Justice implemented conditions on that deal that were supposed to keep Comcast from favoring its own content, many argue that Comcast has not followed those rules, and that the rules themselves are unenforceable.
“Comcast does zero rate its own content and there are caps across the entire subscriber base,” said Ernesto Falcon, a legislative counsel at the Electronic Frontier Foundation, a non-profit digital rights group. “It doesn’t seem like [the DoJ] can enforce it.”
Opponents are quick to point out that there are no obvious benefits for consumers.
“Their only argument is ‘you let Comcast/NBC happen.’” said Craig Aaron, President and CEO of Free Press, an advocacy group. “But all the magical promises of the Comcast/NBC merger haven’t happened. No amazing benefits, nobody’s cable bill went down, there was no access to new content.”
“I think there’s just a lot more skepticism of this deal in and outside of Washington,” Aaron said.