at&t inc. will have significant hurdles to surmount in its ambitious pursuit of time warner inc. beyond just negotiating a takeover price. former regulatory officials and analysts say it<u+2019>s an open question about how tough it will be to win approval for a deal. the best case for the acquisition, which is likely to top $100 billion including debt, rests on the fact that it would be a vertical merger , meaning that the companies aren<u+2019>t direct competitors but are part of the same supply chain. time warner, with its turner cable tv channels and hbo premium network, supplies channels to at&t, which is a distributor of pay-tv and offers wireless service. that<u+2019>s distinct from a horizontal merger, like at&t<u+2019>s failed attempt to acquire wireless carrier t-mobile in 2011, which would have combined two direct competitors offering the same service. the deal would need to win approval from the justice department and require at least some review by the federal communications commission. at&t is expected to offer up some concessions upfront, such as assuring that other pay-tv distributors and wireless operators would still get access to time warner programming, regulatory analysts said. in a research note, credit suisse analysts said they expect a <u+201c>lengthy antitrust review<u+201d> with an <u+201c>uncertain outcome.<u+201d> some former regulatory officials say a precedent for approval was potentially set with comcast corp. <u+2019>s prior acquisition of nbcuniversal, which similarly combined distribution and content, though it was also handed stringent conditions. <u+201c>without knowing the details, this transaction has a structure that we have all seen before, in a different iteration. there should be some comfort level,<u+201d> says michael regan, a former top regulatory executive at 21st century fox inc., who helped the company study time warner during its failed 2014 pursuit. the main issue, he says, <u+201c>is going to be size.<u+201d> at&t, which is the second-largest wireless carrier with almost 90 million retail subscribers and which became the largest u.s. pay-tv provider after acquiring directv last year, already has a massive reach into people<u+2019>s homes and mobile devices. if at&t and time warner are able to complete a deal agreement, they will be in for a lengthy regulatory review and, at the very least, tough conditions. the scrutiny is likely to range far beyond pay television, into how at&t<u+2019>s control of a major content company will affect online video distribution. <u+201c>the government<u+2019>s shown that it<u+2019>s interested not just in the traditional pay-tv market, but in broadband and mobile as well,<u+201d> said former fcc chairman julius genachowski, who oversaw the agency when it blessed comcast<u+2019>s nbcuniversal deal. <u+201c>it<u+2019>s a big hurdle to block a deal, and generally the discussion is around whether and what conditions make sense.<u+201d> one question is whether the deal will receive a close review from the fcc. time warner owns one broadcast station, wpch-tv in atlanta, which falls under the fcc<u+2019>s jurisdiction, and may also have other distribution operations under fcc oversight. at&t would need to apply for a license transfer for at least the station, and the agency would review whether that falls in the public interest, an fcc official said. if hillary clinton wins the presidency, fcc chairman tom wheeler, who has taken a tough stance on big mergers, is likely to stick around for several months, even into the late summer. one person close to mr. wheeler said that he is likely to get involved somehow to influence the review. other hurdles remain. jonathan sallet, the former fcc general counsel who built the case that ultimately led to blocking the comcast-time warner cable deal, now works at the justice department in the antitrust division. during the time warner cable deal review, it became clear that both fcc and justice department officials had serious concerns about whether the conditions they imposed on comcast for its nbcuniversal purchase were tough enough. some consumer advocates said the merger could raise significant worries. <u+201c>at&t would be in a position to favor [time warner] content and deny access to cable, wireless and online competitors,<u+201d> said gene kimmelman, president of public knowledge, a public interest group and a former justice department antitrust official. justice department officials have spent a considerable amount of time in recent years studying the intersection of telecommunications and the rapidly evolving market for video content. a justice department spokesman declined to comment. <u+2014>joe flint, john mckinnon, brent kendall contributed to this article. write to shalini ramachandran at shalini.ramachandran@wsj.com and thomas gryta at thomas.gryta@wsj.com
at&t<u+2019>s bid for time warner would face obstacles  - wsj
shalini ramachandran thomas gryta