While a federal judge's recent approval of the T-Mobile US Inc./Sprint Corp. merger appears to have paved the way for the third- and fourth-largest U.S. wireless carriers to consolidate, the deal still has to clear a few hurdles at the state and federal level, raising complicated questions about when the transaction might close.
The deal has the blessing of both the U.S. Federal Communications Commission and the U.S. Department of Justice, the two federal regulators charged with signing off on the deal. On Feb. 11, the companies won in a state-led appeal against the deal, leading T-Mobile President Mike Sievert to say he hopes to close the merger as early as April 1. But telecommunications and legal experts note that the combination is still waiting on two key approvals — one at the state level in California and one at the federal level.
Though Sievert is pushing for a quick close, the transaction still needs to be approved by the California Public Utilities Commission for integration to be permitted in the nation's most populous state. And while the California PUC is actively considering the merger, Steve Blum — president of Tellus Venture Associates, a management and business development consultancy specializing in broadband and telecommunications — said the administrative law judge considering the deal at the California PUC is "not really" under any binding deadlines to issue a proposed decision.
Moreover, procedural requirements could push the timeline back. Specifically, once the administrative law judge posts a proposed decision, it must be available for public review and comment for 30 days before it can be voted on by the full commission.
This means that the administrative law judge would have to issue a proposed decision 30 days prior to the California PUC's March 26 meeting to sign off on the deal before April 1.
In an October 2019 proceeding related to the case, Suzanne Toller, a lawyer representing T-Mobile, said if the California PUC were to become the last regulatory body to issue a decision on the deal, it would raise "a number of very interesting legal questions about the scope of the commission's jurisdiction over the wireless transaction." This suggests that T-Mobile could take issue with any delay caused by the California PUC's proceeding.
However, Blum notes that it would be unusual in recent history for the California PUC to block the deal outright. Instead, in recent telecom deals, the commission has approved them with concessions.
Karl Bemesderfer, the administrative law judge in this case, has been the judge in other high-profile telecom cases before the California PUC, such as Frontier Communications Corp.'s acquisition of landline assets from Verizon Communications Inc. and Charter Communications Inc.'s combination with Time Warner Cable Inc. and Bright House Networks LLC. In those cases, Bemesderfer approved the deals with specific conditions, such as improved service.
California Attorney General Xavier Becerra will also have the opportunity to share his opinion on the deal with the commission, Blum says.
Becerra was one of the attorneys general involved in the state-led challenge to the deal. After the Feb. 11 ruling that denied the appeal, he said the states are "prepared to fight as long as necessary to protect innovation and competitive costs."
If Becerra writes a letter to the commission sharing his opinion on the deal, the California PUC will have to take the issues raised into consideration, Blum said.
"The PUC can't just ignore it," said Blum. "They have to address Becerra's letter based on the law and based on the record."
At the federal level, a judge still needs to sign off on the DOJ's conditional approval of the deal, which included a settlement. Under the terms of the DOJ's approval, T-Mobile and Sprint must divest Sprint's prepaid business — including the Boost Mobile, Virgin Mobile and Sprint prepaid brands — to DISH Network Corp. Among other terms, the combined T-Mobile and Sprint must provide DISH with "robust access" to the T-Mobile network for seven years as the satellite company builds out its own 5G wireless network.
However, a former DOJ attorney told S&P Global Market Intelligence in an interview that he was not aware of a federal judge refusing to approve a settlement. Given the history with federal courts reviewing DOJ antitrust settlements, the attorney said it was "very unlikely" that the settlement would not be approved because there is a relatively low standard that must be met, which is to determine that the settlement is in the public interest.
The attorney identified one other possible hurdle: if the states appeal the Feb. 11 decision. In this case, the attorney said it is possible that the U.S. Court of Appeals for the Second Circuit could grant a stay, delaying the implementation of the deal.
New York Attorney General Letitia James has said an appeal is under consideration.