AT&T-Time Warner deal works in theory, not in practice: Investment expert
The AT&T (NYSE:T)-Time Warner (TWX) deal works in theory, but investment expert Ivan Feinseth is not so confident it will work in practice, he said Monday.
Feinseth, who is chief investment officer of Tigress Financial Partners, told CNBC's " Worldwide Exchange " that massive mergers between distributors and content creators are more difficult to monetize than they initially seem.
"History has shown that these mega-mergers just don't work. They don't really create shareholder value," Feinseth said. "The first time [Time Warner] was taken over and merged with AOL, that became the biggest disaster in M&A history."
The big regulatory hurdle this deal will have to pass, Feinseth said, will likely be some kind of open-access mandate.
"In theory, merging distribution and content makes sense, but it doesn't really work in practice because the content is dependent on a broad base of distribution. So if you narrow it down to one distributor, it doesn't really work for the content," Feinseth said.
He added that having multiple distributors benefits the distributors themselves, the content producers and the consumers, so a deal focused on distributing that content exclusively would not make much sense.
One positive Feinseth sees coming out of this deal is the confirmation that there is still major value in content.
"I think the biggest beneficiary of this is Disney (DIS). Disney really has not been valued based on its content, and they are the king of content," Feinseth said, adding that this could position other content producers to take part in future deals.
The timing of the deal suggests that AT&T may be trying to use some of the political spotlight to its benefit, analyst Barton Crockett said Monday.
Crockett, a senior analyst at FBR Capital Markets & Co., told "Squawk Box" that whether the deal goes to the Federal Communications Commission or the Department of Justice for approval, he is skeptical that it will be easily approved by either agency.
"I think that if they have to get FCC approval, and that's a very loose standard that can be very politicized, it can be very difficult to get this deal through. I think they're trying to avoid the FCC," Crockett said.
Instead, he said the company is vying for the DOJ, where the deal would likely pass antitrust laws. But under a new administration, even the DOJ could face political pressure, he added.
Crockett said he found it very telling that the telecom giant decided to announce this deal 17 days before a presidential election where populism is a strong theme.
"I think that that really puts this thing kind of front and center on the politicians' radar screens [and puts] it in the middle of this presidential debate," Crockett said.
He added that had the company waited until after the election, it would have faced less political scrutiny.
As for the potential future for AT&T and Time Warner should the deal be approved, Crockett is also hesitant.
The creative appeal of Time Warner stands to be compromised if AT&T is unable to distribute exclusive content effectively, which Crockett said would be difficult in the current "political environment" surrounding content licensing and availability.
