FCC Vote on Sprint-Nextel Merger Expected This Week
An FCC vote on the proposed Sprint-Nextel merger is expected as soon as this week, after the 2 companies committed Tues. to certain service implementation milestones in the 2.5 GHz band and provided details on the spin-off of Sprint’s incumbent local telephone operations, several sources said. FCC Comr. Adelstein has worked with the 2 companies to secure the 2 commitments, a knowledgeable source said.
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The FCC is “getting closer to the decision” on the merger, the source said: “These [commitments] resolve 2 of the most important concerns” the Commission had. The final order is expected to be released a few days after the vote, the source said.
Sprint and Nextel committed to 2 service implementation milestones in the 2496-2690 MHz band: (1) In 4 years after the effective date of the merger order, the merged company would offer service in the 2.5 GHz band to at least 15 million Americans. “The deployment will include areas within a minimum of 9 of the nation’s most populous 100 basic trading areas (BTAs) and at least one BTA less populous than the nation’s 200th most populous BTA,” the companies said Tues.: “In these 10 BTAs, the deployment will cover at least 1/3 of each BTA’s population.”
(2) In 6 years after the effective date of the order, Sprint-Nextel would offer service in the 2.5 GHz band to at least 15 million more Americans in areas within a minimum of 9 additional BTAs in the 100 most populous BTAs, and at least one additional BTA less populous than the nation’s 200th most populous BTA. In those additional 10 BTAs, the companies said, the deployment will cover at least 1/3 of each BTA’s population. In other words, within 6 years of the order’s effective date, the merged company will offer service in the 2.5 GHz band to at least 30 million Americans in at least 20 BTAs, at least 2 of which are rural communities outside the nation’s top 200 most populous BTAs.
While committing to meeting the implementation milestones, Sprint and Nextel said they should “not be required” to do so in case “circumstances beyond their control prevent Sprint Nextel from achieving those milestones.” Examples of such circumstances, they said, include band reconfiguration delays, the failure of domestic or international standards-setting bodies to agree on technology standards, unforeseen technological impediments and prolonged international cross-border interference negotiations. But the companies said in case they fail to meet the milestones due to circumstances “within [their] control, then Sprint and Nextel understand that the Commission may take appropriate enforcement action, such as monetary forfeitures, mandatory divestiture or forfeiture of Nextel’s 2.5 GHz licenses.”
“These are significant commitments,” the source said. The FCC had “concerns about spectrum the 2 companies were getting” at 2.5 GHz and it “wanted to make sure” that if it lets them “keep this spectrum these commitments are made,” the source said: “It’s good for the merger and for the industry because Sprint and Nextel are the largest holders in this band and these announcements will jump- start future wireless services in this band.”
Sprint and Nextel also said they expect the new local company -- planned to be spun off of Sprint to the Sprint Nextel shareholders after the merger -- will receive an “equitable debt and asset allocation” to be a “financially secure, Fortune 500 company.” The issue has been raised by Communications Workers of America, which worried about potential harm the merger could cause to Sprint’s about 8 million local customers. CWA has urged the FCC to condition any merger approval on the combined company’s commitment to an “equitable division of assets and debt” at the time of spin-off.
The new company’s stock is expected to be traded on the N.Y. Stock Exchange, and is anticipated to have “a level of equity, debt and other financial characteristics consistent with those of companies that have been rated ‘investment grade’ by major ratings agencies,” Sprint and Nextel said. The company, named LTD Holding Co. until its new brand is launched at the time of the spin-off, is expected to generate ample cash flow and to pay a dividend attractive to investors, they said.
LTD Holding will be led by CEO Daniel Hesse, who most recently was chairman and CEO of Seattle-based Terabeam Corp., Sprint and Nextel said. Other appointments include: (1) Sprint’s Local Telecom Div. Pres.-COO Michael Fuller named COO of the new company. (2) Sprint Senior Vp-Treas. Gene Betts named CFO. (3) Sprint Exec. Vp-Gen. Counsel & External Affairs Tom Gerke named gen. counsel.
“The creation of LTD Holdings Company as a separate company will enhance its ability to meet customers’ needs,” Sprint and Nextel said. With Sprint Nextel planned to be a “nationally-focused wireless carrier… divesting Sprint’s wireline local service operations into an independent, stand-alone corporation will create a company with laser-sharp strategic focus on meeting the needs of its residential and business customers in its local franchised territory,” they said.
The FCC also considers whether to require the combined company to provide roaming to other companies on non-discriminatory terms and conditions and at reasonable rates, an agency source said. “We take roaming seriously and we want to deal with it but the question has always been whether to deal with it as part of the [merger] order or as a stand-alone item,” the source said. Other conditions may be considered. A Sprint spokesman said the company hopes for a “smooth” approval of the merger.