President Trump? Wall Street Yawns

Despite the soul-searching and disbelief that has informed the liberal reaction to his stunning election-day victory, President-elect Donald J. Trump has had no negative impact on the stock market, so far.

As for what he would do to the media business that had been the target of much of the Republican candidate’s disdain during his campaign, most observers believe it is too soon to call.

While gloomy predictions of plunging markets were made in the wake of Trump’s surprise victory, the Dow Jones Industrial Average actually rose 256 points on Nov. 9, while media stocks rose a slight 1% to 2%. The Dow closed Nov. 10 up more than 200 points.

While the investment community is showing early optimism, media-industry analysts and executives are taking a cautious approach to what could come in a Trump administration, with many writing off some of the former reality TV star’s criticism as playing to his audience.


Trump had repeatedly called out media bias as the reason for missteps during the campaign, so it was no surprise that he turned his bluster box up to 11 in October, shortly after AT&T announced its $108.7 billion deal to purchase Time Warner Inc. Trump, citing what he said was too heavy a concentration of power among too few media companies, vowed to block the mega-merger, adding if he had his druthers, Comcast’s 2011 purchase of NBCUniversal would be unwound for the same reasons.

While his ultimate stance on big media and mergers will depend on his picks to head key regulatory agencies like the Department of Justice and the Federal Communications Commission, Dish Network chairman and CEO Charlie Ergen said that position could change with time.

“You always have to take it seriously what someone who is running for president says,” Ergen said during Dish’s earnings call. “Any candidate would reserve the right to change their mind if they had different facts. The regulatory process is probably as unknown as it was before the election.”

Related:Ergen: Trump Could Have Light Regulatory Hand

Whether Trump would be able to have any effect on those mergers is unclear, but most observers believe he would be out of his jurisdiction in having any direct impact on the deals.

AT&T and Time Warner have characterized their merger as an opportunity to change consumer behavior, using Time Warner content and AT&T distribution vehicles like its upcoming DirecTV Now to offer skinnier bundles, mobile and social media-exclusive content and low-cost video products supported by advertising.

What the combination doesn’t do is remove a competitor from the landscape — one of the chief concerns of any Justice Department review. The deal may not even attract scrutiny from the FCC because it would involve the transfer of just a handful of broadcast and satellite licenses. Time Warner owns one broadcast license, for TV station WPCH, the Atlanta-based holdover from the days of Superstation WTBS, and dozens of satellite licenses.

While the Trump administration’s options to lower the regulatory hammer on the deal are limited legally, it could heap conditions on the transaction. Those conditions could make a deal unattractive for both parties.


At least for now, most analysts believe Trump has other pressing issues — his pledges to abolish Obamacare, build a wall on the Mexico border and deport illegal aliens, to name a few — and might not devote much attention to telecom policy in his first months in office.

“The logical thought process is that a Republican-controlled executive branch and Congress would likely lead to far more laissez-faire policies, which would be good for consolidation and good for an environment with less regulation,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said.

As far as Trump’s comments about AT&T-Time Warner, Wlodarczak wrote them off to “political hyperbole,” and said the deal most likely will pass. As far as Comcast-NBCU, the analyst believes Trump’s hands are tied.

“The Comcast-NBCU comment was, again, arguably hyperbole as he was mad at coverage of his campaign,” he said. “I don’t think he can do anything about Comcast-NBCU.”

AT&T was taking an optimistic approach to the new administration, with senior executive vice president and chief financial officer John Stephens pointing out their similar approaches at the Wells Fargo Technology, Media and Telecom conference last Wednesday.

“From a company perspective, we really look forward to working with President-elect Trump and his transition team,” Stephens said at the conference. “His policies and his discussions about infrastructure investment, economic development and American innovation all fit right in with AT&T’s goals. We’ve been the leading investor in this country for more than five years running, and our Time Warner transaction is all about innovation and economic development, consumer choice, and investment in infrastructure with regard to providing a great 5G mobile broadband experience. So we look forward with optimism to working with the leadership and providing benefits to consumers and to our shareholders.”

Time Warner declined to comment.

Some analysts warned the new commander-in-chief could have a chilling effect on future deals.

“It’s unclear; it’s hard to know where he [Trump] is on Fox these days,” Telsey Advisory Group media analyst Tom Eagan said. “He probably doesn’t like CNN. To the degree it increases the discount on the [AT&T-TW] deal, it could lower the zeal for more consolidation.”

Time Warner stock was down last Wednesday — it closed at to $86.44 per share, down 1.6% or $1.43 each — but the bigger news on the shares has been the discount to the price AT&T agreed to pay. When it announced the deal Oct. 22, AT&T said it would pay $107.50 per share in cash and AT&T stock for every Time Warner share. At the Nov. 9 close, Time Warner is trading at a nearly 20% discount to AT&T’s offering price. Most of that discount has been because investors aren’t sure it will receive regulatory approval.

Wlodarczak wasn’t so sure Trump alone could discourage further consolidation. He said the market will do that.

The chatter over more vertically integrated deals in the wake of AT&T-Time Warner was largely generated by the press, Wlodarczak said. Like other analysts, he doesn’t believe pairing content and distribution makes much sense, and he sees AT&T’s move as more of a diversification play.

Instead, Wlodarczak believes the markets will focus on the potential positives of a Trump regime.

“The ramifications for Trump should be less regulation, Obamacare disappears, tax rates decline, all of which is good for the backdrop for the sector,” Wlodarczak said. “I think it is reasonable to assume that a lot of what the current FCC has pushed on the industry will be thrown out, including most importantly Title II-led regulation on cable, which is fundamentally positive.”


He also believes conditions will be more favorable to consolidation, adding that wireless carrier T-Mobile could be an attractive target for Sprint or a teamed up Comcast and Charter.

Sprint stock rose 12% on Nov. 9, to $7.11 per share, a twoyear high, while T-Mobile rose 5% to $53.01 each.

Ergen pointed to the Republican control of the House and Senate, which should help Trump push through his agenda.

“You’re probably going to see bipartisan support for infrastructure, a more rational tax code, particularly as it relates to corporate taxes and particularly as it relates to maybe bringing overseas money back, which can then pay for infrastructure,” Ergen said.