Morgan Stanley Says AT&T And DirecTV Merger Could Close Soon

In a report published Monday, Morgan Stanley analyst Simon Flannery suggested that the next few weeks will be "action packed" for

as its merger with

is imminent. According to Flannery, the merger faces "fairly limited" opposition despite the approximate six percent deal discount as AT&T valued the merger of DIRECTV at $91.61 while shares of DIRECTV are trading closer to $86. The analyst added that the deal close in the coming weeks as the FCC "restarts the shot clock" (paused on day 170 out of 180) once an appeals court decision is received and document review is concluded. However, despite the positives on the deal closing, Flannery suggested there are also some headwinds. Specifically, AT&T issued an 8-K warning of revenue and margin pressure in the first quarter 2015 in the wireless business. In addition, the company will experience some flowback related selling by DIRECTV shareholders who will own around 15 percent of AT&T post-close. Finally, Flannery also noted that leverage is another area of focus for AT&T given the M&A, $18 billion AWS spectrum purchase, and potential spend in the Broadcast auction. Shares remain Equal-weight rated with a $34 price target.