By Thomas Gryta, John McKinnon and Keach Hagey

AT&T Inc. Chief Executive Randall Stephenson made an $85 billion wager last month that would turn the giant telephone company into one of the world's biggest media companies by swallowing Time Warner Inc.

The same day, Donald Trump told supporters in Gettysburg, Pa., he would block the deal if elected president. "It's too much concentration of power in the hands of too few," he said, calling the merger "an example of the power structure I am fighting."

Few companies had more at stake inthe presidential election than AT&T, which expected Hillary Clinton to be in the White House, said one former AT&T executive in Washington. Other businesses in a similar position are watching to see if the merger survives a still-undefined Trump administration.

For the telecom industry, Mr. Trump could usher in an era of deregulation, a change from what many companies viewed as a strong-arm era under President Barack Obama. Yet Mr. Trump's talk on the campaign trail about crushing the AT&T deal has left executives, lobbyists, bankers and others wondering what his view will be from the White House.

The company has one of the largest lobbying operations in Washington -- spending $16 million last year -- though the strength of such connections might not translate to the new world.

Investors have been skeptical from the start, even when polls showed Mrs. Clinton likely to win, because of questions about regulatory hurdles and opposition from advocacy groups and rivals. On Wednesday, Time Warner's shares were trading at 17% below the value of the offer.

AT&T executives and advisers remain confident about getting the blockbuster deal through, said people familiar with the matter, though they are shifting tactics and awaiting Mr. Trump's cabinet appointments. One consultant who works with AT&T said Mr. Trump's criticism of the deal sounded like a "throwaway comment."

"We support president-elect Trump's agenda of economic growth, investment in infrastructure and rational regulation," Mr. Stephenson said Wednesday in a written statement. "We look forward to presenting how our Time Warner transaction supports that agenda for the benefit of consumers."

Time Warner declined to comment.

Since his election win, Mr. Trump hasn't spoken publicly about the AT&T transaction, which would put CNN, HBO and the Warner Bros. studio under the same corporate roof as AT&T's 90 million retail wireless customers and 25 million pay-TV subscribers.

A spokesman for the Trump transition team didn't have an immediate comment.

Unknown is whether the Federal Communications Commission will have jurisdiction and, more broadly, whether Mr. Trump will pull back from his campaign rhetoric, as he has appeared to do on a handful of other issues.

While Mr. Trump won't have the power to veto the deal, its success may rest on the antitrust views of his nominees for attorney general and Justice Department antitrust chief. He will also get to appoint the head of the FCC.

Mr. Trump, who is now assembling his administration, has sent conflicting signals about telecom and media regulation.

Former New York Mayor Rudy Giuliani said at The Wall Street Journal CEO Council meeting this week that the Trump administration would have a traditional Republican approach to the antitrust division, similar to the Bush and Reagan administrations. "The last thing in the world you are going to see is an antibusiness administration," he said. (The original AT&T was broken up under the Reagan administration.)

For now, the focus is on Jeffrey Eisenach, a consultant and free-market economist who is leading Mr. Trump's policy-transition team on telecom issues. He has expressed a deregulatory stance in the past, including opposition to the FCC's net-neutrality rules that require all internet traffic to be treated equally. He didn't respond to requests for comment.

"The notion that all Republicans are complete laissez-faire when it comes to antitrust policy I don't think is accurate," Mr. Eisenach said on C-Span in October. There would be support, he said, for "a less intrusive FCC more focused on enforcing rules and less focused on writing new ones."

Within the telecom giant, there is concern over the deal's fate, according to the people familiar with the matter. The company miscalculated by announcing its deal weeks before the election, these people said.

AT&T received the blessing of regulators for its nearly $50 billion takeover of DirecTV last year. But it failed to buy rival T-Mobile in 2011 after resistance from regulators. AT&T has argued the Time Warner deal, which wouldn't combine two competitors, isn't comparable to T-Mobile.

Mr. Trump's criticism of mainstream media -- especially CNN, which is owned by Time Warner -- is another wild card in the regulatory review process, people close to AT&T said.

Consultants and lobbyists close to AT&T said they viewed Mr. Trump's comments as a criticism of CNN's coverage, rather than opposition to the deal. Mr. Trump has accused CNN and other news media of bias, inaccurate coverage and of not understanding the views of his supporters. During the campaign, he often referred to CNN on Twitter as the "Clinton News Network."CNN President Jeff Zucker has defended the network's election coverage. In the days after the deal was announced, Mr. Stephenson, the AT&T chief, promised to safeguard CNN's editorial independence.

Time Warner executives aren't panicked about Mr. Trump's pledge to block the merger, believing that antitrust law is on their side, according to people familiar with the company.

"It is going to have to go through a regulatory review process that is dictated by rules, regulations and laws," Mr. Stephenson said in an interview after the deal was announced. He has said it shouldn't be blocked by the government because the deal is vertical in nature: The businesses don't overlap.

Pantelis Michalopoulos, a partner at Steptoe & Johnson LP who heads the firm's telecom practice and has worked on getting similar deals approved, said favoring small government isn't necessarily inconsistent with a tough antitrust stand, citing Teddy Roosevelt.

"The preference of more traditional conservatives for less regulation appears to clash with another instinct -- the mistrust of too much power in the hands of too few incumbents," he said.

In a written statement after the AT&T deal, Mr. Trump's campaign also made a reference to Mr. Roosevelt's trustbusting and said as president Mr. Trump would "break up the new media conglomerate oligopolies."

AT&T and its executives learned firsthand the power of government influence, particularly under Democrats. In addition to abandoning its T-Mobile takeover, AT&T fought and lost against the Obama administration's sweeping net-neutrality rules, which govern the flow of internet traffic.

For much of this year, the company took steps to curry favor with what executives expected would be a Clinton administration.

AT&T's top lobbyist, Jim Cicconi, planted himself in the Clinton camp this summer with an endorsement in June. Mr. Cicconi, who has since retired, said in a statement at the time he had backed every Republican presidential candidate since 1976, but feared Mr. Trump "would set our nation on a very dark path."

Company employees chipped in substantial amounts to Mrs. Clinton -- about $289,000 -- compared with less than $22,000 for Mr. Trump, according to the Center for Responsive Politics, a nonpartisan group that collects data on political contributions and spending.

Before the Nov. 8 election, AT&T considered submitting its merger plan to a Democratic-led FCC and Justice Department, said people familiar with the matter. Now, it might seek to avoid FCC review by jettisoning Time Warner's airwave licenses.

An FCC review, which focuses on whether the deal is in the public interest, would subject the deal to broader and potentially tougher scrutiny than the Justice Department's antitrust review.

While a negative decision from the Justice Department could be fought in court, the FCC can essentially block the deal by placing a lengthy, complex review in the hands of an administrative law judge. The agency moved to do that when Comcast Corp. tried and failed to buy Time Warner Cable last year, and during AT&T's unsuccessful bid for T-Mobile in 2011.

Mr. Trump's selection of Republican National Committee Chairman Reince Priebus as his chief of staff was "reassuring to a lot of people," said a person familiar with AT&T's thinking.

But selection of Steve Bannon as Mr. Trump's special counsel was a question mark. Mr. Bannon ran Breitbart News Network, a media outlet that promoted nationalist, anti-immigrant and antiestablishment views, before joining the Trump campaign in August.

"If the facts and the law are followed, the deal should get approved," said Robert McDowell, a Republican former FCC commissioner.

Others aren't so sure. Michael Copps, a former Democratic FCC commissioner, said there remained too much guesswork regarding Mr. Trump's plans, even though he personally believes it concentrates too much power in the hands of one company. "Every morning is a surprise,' he said.

--Dana Mattioli and Sarah Rabil contributed to this article.

Write to Thomas Gryta at thomas.gryta@wsj.com, John McKinnon at john.mckinnon@wsj.com and Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

November 16, 2016 13:40 ET (18:40 GMT)

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