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Why AT&T Probably Will Get to Buy Time Warner After All

Mar 28, 2017

President Donald Trump repeatedly singled out AT&T's deal to buy Time Warner during the campaign as the kind of combination he wouldn't allow as president.

But after the Trump administration this week picked a longtime antitrust lawyer, Makan Delrahim, to head the Justice Department office that reviews mergers, the threats to block AT&T appear ever more likely to be another campaign trail promise that won't be fulfilled.

Before Trump nominated Makan, who worked in the Justice Department's antitrust division under the Bush administration, rumors circulated that people with more political views might be chosen. In January, reports circulated that Trump might pick conservative law professor and former Federal Trade Commission member Joshua Wright, who has staked out more radical views, to the post.

"Lots of people thought Trump would go far to the right and pick an ideologue on antitrust," says David Balto, an attorney who helped review mergers at the FTC under President Clinton. "But this pick is not that. Makan is a moderate."

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Delrahim would take a professional approach to evaluating mergers, without being swayed by politics and recusing himself when former clients had deals under review, Balto predicts.

In an interview in October, Delrahim said he did not think the AT&T deal raised major antitrust issues. "The sheer size of it, and the fact that it’s media, I think will get a lot of attention,” Delrahim said during a television interview on the BNN network in Canada. “However, I don’t see this as a major antitrust problem."

AT&T and Time Warner are not in the same business, so competition is not directly reduced by the combination. Antitrust enforcers typically deal with concerns about such combinations by imposing conditions, not blocking the deals. Trump's concerns, such as that the combined company would have too much power over public opinion, could be addressed by imposing limits without blocking the deal, analysts have noted.

The Bush administration's antitrust division where Delrahim worked as a top lawyer was considered somewhat more lax on mergers than Obama's. But the unit sued to block the US Airways-United Airlines merger and stopped satellite video services DirecTV and EchoStar (dish) from combining. Bush lawyers also went to court and lost in a bid to block Oracle (orcl) from acquiring rival PeopleSoft.

Delrahim's proposed appointment, which must be approved by the Senate, follows other positive signs for AT&T's (t) deal emerging from the Trump White House this year, including a meeting between AT&T CEO Randall Stephenson and the president in January.

AT&T last year offered $109 billion including debt for Time Warner as it looks for new avenues for growth. The carrier's once strong wireless phone business is slowing, following the long decline in its wired telephone business. The combination of assets from DirecTV, acquired in 2015, and Time Warner (twx) would give AT&T a more diversified revenue base and a strong position to attract Internet video viewers.

Time Warner's stock price has slowly climbed closer to AT&T's per-share offer of $107.50. After trading around $85 for much of last year, the shares have risen to almost $100, reflecting greater optimism that the deal will be completed. Trading at $97.45 on Tuesday, Time Warner's stock price reflects a 9% discount, about typical for mergers that have been announced but still have months to go before being approved and completed.

For more on opposition to the merger, watch:

Trump came out strongly against the AT&T transaction during the campaign, saying at one rally it was "a deal we will not approve in my administration because it's too much concentration of power in the hands of too few." Later the same day, his campaign released a statement saying Trump "would never approve such a deal because it concentrates too much power in the hands of the too and powerful few."

Among other assets, Time Warner owns the CNN cable network, which Trump frequently berated as biased during the campaign.

The Delrahim appointment also likely vindicates the views of T-Mobile chief financial officer Braxton Carter, who has resisted the notion that Trump would unleash a slew of telecom mergers not permitted under Obama.

Some analysts thought Trump might appoint more radical merger reviewers who would, for example, allow Sprint (s) and T-Mobile (tmus) to combine after Obama regulators killed that deal.

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