(Reuters) - AT&T Inc Chief Executive Randall Stephenson on Monday told investors he expects the planned $85.4 billion acquisition of Time Warner Inc to receive regulatory clearances as investors showed skepticism by pushing shares of both companies lower.AT&T said on Saturday it had agreed to buy Time Warner for $107.50 per share, giving it control of cable TV channels HBO and CNN, film studio Warner Bros, and other coveted assets in a deal that will reshape the media landscape if it receives government approvals."While regulators will often times have concerns with vertical integrations, those are always remedied by conditions imposed on the merger, so that's how we envision this one to play out," Stephenson told CNBC in an interview.The deal, the world's largest in 2016, is expected to close by the end of 2017, AT&T told investors on a conference call on Monday.Shares of AT&T fell 2.4 percent to $36.58 and shares of Time Warner tumbled 2 percent to $$87.70 in morning trade on the New York Stock Exchange. Dallas-based AT&T said on Saturday the deal would need approval of the U.S. Justice Department and the companies were determining which Time Warner U.S. Federal Communications Commission licenses, if any, would transfer to AT&T as part of the deal. Any such transfers would require FCC approval. Despite its big media footprint, Time Warner has only one FCC-regulated broadcast station, WPCH-TV in Atlanta. Time Warner could sell the license to try to avoid a formal FCC review, several analysts said.Wall Street analysts on Monday expressed concerns about the implications of the regulatory challenges facing the deal on Time Warner shares. "From a regulatory perspective we believe management are relying heavily on the argument that vertical mergers have historically been approved, yet with so much up in the air in Washington, we find this riskier than would be typical," said Cowen & Co analyst Colby Synesael.The deal, announced just over two weeks before the Nov. 8 U.S. election, generated skepticism among both Republicans and Democrats on Sunday."We are unprepared at this point to assign anything higher than a 50/50 probability of deal approval," wrote MoffettNathanson Research in a report, downgrading Time Warner to "neutral" but raising its target price by $8 to $100.Similarly, Credit Suisse lowered its rating on Time Warner to "neutral" from "outperform", but raised its price target to $107.50 from $90."We believe the value of the offer is full on current earnings and cash flow; that the probability of a counteroffer from a third party is low; and that the transaction will face lengthy scrutiny from regulators," Omar Sheikh, a Credit Suisse analyst wrote in a report. "We now see better opportunities elsewhere in U.S. Media." (Additional reporting by Malathi Nayak; Editing by Nick Zieminski and Meredith Mazzilli)
