(Reuters) – Wall Street signaled skepticism on Monday that AT&T Inc would secure the government approvals needed to carry out its planned $85.4 billion acquisition of Time Warner, with shares of both companies falling as analysts scrutinized the deal.

Time Warner shares were trading some 20 percent below the implied value of AT&T’s $107.50 per share cash and stock offer, indicating investors doubt that the companies would be able to complete the transaction.

The deal, announced on Saturday, would give AT&T control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted assets and reshape the media landscape.

Dallas-based AT&T said on Saturday it would need approval of the U.S. Department of Justice and the companies were determining which Time Warner U.S. Federal Communications Commission licenses, if any, would need to transfer to AT&T. Any such transfers would require FCC approval.

AT&T Chief Executive Randall Stephenson said on Monday he expects government clearances for the deal because it is a so-called vertical integration that will not eliminate a competitor, a situation that is viewed more favorably by antitrust enforcers.

“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.

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.

Any decision to review the deal would be made by regulatory officials at the Department of Justice and the Federal Trade Commission, White House spokesman Josh Earnest told reporters on Monday.

“The president would hope and expect that regulators would carefully consider the potential impact of this deal on consumers,” Earnest added.

Shares of AT&T closed down 1.7 percent at $36.86 and shares of Time Warner fell 3 percent to $86.78.

Focus on approvals

Investors, Wall Street analysts and traders on Monday expressed concerns about the implications of the antitrust and regulatory challenges.

“I don’t know how favorably regulators will look upon this,” said media investor Sanjay Sen, chief investment officer of BloombergSen Investment Partners of Toronto.

The total value of broken deals is nearly $700 billion so far this year, a fact that has sidelined some investors.

“The regulatory environment has been unbelievable this year and I think everyone is on edge,” said an arbitrage investor considering buying exposure to the deal who did not want to be identified because they were not authorized to speak to the press.

The biggest deals to fall apart in 2016 include Office Depot–Staples, Baker Hughes–Halliburton, Allergan–Pfizer and Norfolk Southern–Canadian Pacific Railways. Many of the deals drew objections from the Department of Justice and U.S. Treasury.

“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.

The deal’s arbitrage spread of more than 20 percent is wider than five other recent deals that regulators subsequently shot down or were withdrawn, including Comcast Corp’s planned takeover of Time Warner Cable. That deal had a spread of only 5 percent.

The deal, announced just over two weeks before the Nov. 8 U.S. election, was also generating skepticism among both Republicans and Democrats.

Other questions

Others were unnerved by the rationale for the deal and the massive $170 billion debt balance the combined company may hold after the deal closes.

“The CEOs couldn’t easily explain the synergies and I can’t clearly understand them,” said Sen, who also expressed concern about AT&T embarking on a new deal so shortly after buying DirecTV last year for $48.5 billion. “How successfully will it integrate these three large and different businesses?” he asked.

Analysts at Cowen & Co said it was a “struggle” to understand why the acquisition made sense.

“If it is simply differentiated content AT&T is interested in we don’t understand why this couldn’t have been solved by some form of partnership,” the firm wrote in a note to downgrade the company’s investment rating to ‘market perform’ from ‘outperform.’

Analysts at Moody’s, which put AT&T on review for a downgrade after the acquisition was announced, said regulators could include conditions that limit the wireless provider’s ability to useTime Warner content as a competitive advantage, ultimately undermining its objective to differentiate its mobile and pay TV platforms with exclusive content.

John Traynor, chief investment officer of People’s United Wealth Management, which owns shares of both AT&T and Time Warner, said his firm would vote for the deal as it looked like a good marriage of content and distribution.

“In the 1980s and 1990s it was all about hardware. For the last 10 years it’s been all about connectivity and content,” Traynor said.

He expects the deal to face lengthy scrutiny by regulators but eventually to be completed. “We’ll be talking about this a year from now, but Comcast-NBC got through,” he said, referring to the $30 billion purchase of NBCUniversal by cable company Comcast.

“We think AT&T can handle the debt load,” he added.

(Additional reporting by Ross Kerber, Malathi Nayak, Carl O’Donnell and Roberta Rampton; Editing by Nick Zieminski, Meredith Mazzilli and Bill Rigby)