AT&T Inc (NYSE:T) has been a staple in BNL Portfolio the for years. However, we took profits in AT&T stock back in October, fearing that the Time Warner Inc (NYSE:TWX) will crush T stock if the merger is approved. I gave six reasons why Time Warner will destroy AT&T, and unfortunately, I feared that the merger would be approved. Therefore, I took profits, removing AT&T stock from the BNL Portfolio.
However, we added 5,000 shares on November 3 to make AT&T stock our third largest position. The reason is simple: We no longer believe the DOJ will approve AT&T’s $85 billion acquisition of Time Warner. Therefore, we now see T stock like we did before: One of the true no-brainer investments in the market.
What changed with AT&T stock
We believe the Justice Department’s suit against AT&T, which is unprecedented in itself, for illegally blocking carriage of the Los Angeles Dodgers’ TV channel sends a strong message for how the government views the AT&T Time Warner merger.
AT&T believes the chances of a blocked merger are low, but then again AT&T does not have the best record at predicting such moves (remember T-Mobile?). The fact that AT&T is being sued for activities that involve blocking network channels and gain bargaining power to negotiate prices can be used against the company when trying to acquire one of the largest networks.
We believe that regulators will find that combining AT&T, DirecTV, and Time Warner will create an unfair competitive advantage for AT&T versus other Pay-TV service providers. After all, what purpose would AT&T have to acquire Time Warner if not to provide special incentives to its own customers with HBO, provide itself with lower rates, and potentially hike rates for competitors. Otherwise, the Time Warner acquisition makes no sense at all.
Therefore, if the chances of an AT&T Time Warner merger are diminished, then T stock looks especially appealing after falling from a high of nearly $44 to a current price of $36.65/share.
What makes AT&T stock so attractive right now?