The California Public Utilities Commission (CPUC) voted unanimously Thursday to approve, with conditions, the merger of T-Mobile and Sprint operations in the state of California.
The move didn’t come entirely out of the blue since the CPUC in March issued a proposal to approve the merger and put it out for public comment. At the same time, California Attorney General (AG) Xavier Becerra announced that his office reached a settlement with T-Mobile.
The FCC and Department of Justice (DoJ) approved the transaction last year with conditions, including the divestiture of Boost Mobile to Dish Network and the establishment of Dish as a fourth facilities-based operator to replace Sprint. A coalition of states, including California and New York, filed suit to block the deal. U.S. District Judge Victor Marrero ultimately ruled in favor of the companies in February.
But the CPUC had not voted on it until Thursday, and its vote came after an unusual series of events, driven in part by the economic upheaval from the COVID-19 crisis.
T-Mobile CEO Mike Sievert told the CPUC on March 31 that it was closing its merger with Sprint with or without the CPUC’s approval. He said banks were prepared to provide bridge financing for an April 1 close, and if the closing were delayed, they ran the risk of never being able to get the deal done given turmoil in the financial markets.
Plus, T-Mobile argued that it didn’t need the CPUC’s blessing. The CPUC disagreed, telling the companies they needed to refrain from merging their California operations until a commission decision was made. The companies agreed (PDF) they would not move forward in California until the vote was taken.
Ahead of the CPUC’s voice call vote Thursday, CPUC Commissioner Clifford Rechtschaffen described some of the commitments the companies were making to get the deal done. The state imposed a number of additional conditions, including that the new T-Mobile, which doesn’t participate in Lifeline in California, continue offering Lifeline in California indefinitely to both Sprint’s existing Lifeline customers and to new customers. The new entity also is required to add 1,000 jobs in California in five years.
While commissioners said the anti-competitive nature of the transaction made it a tough one to approve, they said the inclusion of strong enforcement provisions for the conditions and a compliance monitor made it more acceptable.
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The revised proposal (PDF) to approve the merger was posted this week, spelling out the many conditions. Steve Blum, president of the wireless consultancy Tellus Venture Associates who's been closely following the CPUC proceeding, noted in his blog that service obligations were tweaked. T-Mobile needs to deliver 300 Mbps download speeds to 93% of Californians by 2024, but its obligation to serve rural communities will be capped at offering 50 Mbps download speeds to 94% of rural residents and 100 Mbps to 85% by 2026.
Blum also noted that the CPUC’s draft makes it clear the deal falls within the commission’s jurisdiction.
"Wireless carriers are ‘telephone corporations’ and therefore public utilities under Public Utilities Code Sections 216, 233 and 234,” the CPUC stated. “Both Joint Applicants, T-Mobile and Sprint, have California wireless subsidiaries that are public utility telephone corporations under state law, and subject to the jurisdiction” of the commission. States can regulate “neither wireless rates nor entry into the wireless market, but they retain jurisdiction over ‘other terms and conditions’ of wireless service.”
Blum said he expects that dispute eventually will be resolved in federal court.