FCC, DoJ Approve Sprint-Nextel Merger
The FCC approved the acquisition of Nextel by Sprint Wed., without requiring any divestitures in individual markets but with a more significant condition on 2.5 GHz spectrum than expected. The action came after the 2 companies committed a day before to service implementation milestones. The companies had agreed to offer service within 6 years 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.
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The Justice Dept.’s Antitrust Div. also approved the merger Wed., announcing it closed its investigation and found the transaction would “not give the companies market power in the areas in which they compete.” DoJ had focused its investigation on mobile wireless telecom services offered by the merging companies, as well as on developing products such as advanced wireless broadband services where the companies were potential competitors. “None of the theories of competitive harm that the [Antitrust] Division considered were ultimately supported by the facts,” DoJ said.
As a condition of its merger approval, the FCC required that Sprint Nextel adhere to their commitments with regard to the 2.5 GHz, “unless circumstances beyond its control prevent the merged entity from reaching those milestones.” In addition to other specific implementation requirements agreed to by Sprint Nextel, the first milestone requires the merged company to offer service using BRS/EBS spectrum to at least 15 million Americans within 4 years of the effective date of the order, and the 2nd milestone requires the company to serve an additional 15 million Americans within 6 years. The companies have shown they can do that and the agency turned the commitments into a condition, a source said.
Another condition specifies that Sprint Nextel “may not prevent its subscribers from reaching another carrier and completing calls via manual roaming, unless specifically requested to do so by a subscriber,” the FCC said. Given the broad range of roaming concerns raised in the proceeding, the FCC said it would be more appropriate to address roaming issues in a separate proceeding, which was announced in the Alltel-Western Wireless merger decision.
The order also contains a tough language on the E-911 compliance requirements, saying that unless the merged company has a waiver or consent decree approved by the FCC, it must still meet its Dec. 31 deadline. If it doesn’t do so, and if there’s no acceptable waiver or consent decree in place, the FCC “will not hesitate to take enforcement action,” the order states.
The FCC approved the transfer of control of all licenses and authorizations held directly and indirectly by Nextel to Sprint, including: (1) SMR licenses in the 800 MHz and 900 MHz bands. (2) Licenses in the 1.9 GHz band that resulted from the 800 MHz rebanding proceedings. (3) BRS licenses in the 2.1 and 2.5 GHz bands. (4) Leases of EBS spectrum in the 2.5 GHz band.
The FCC said the merger’s benefits “outweigh any potential public interest harms.” The public interest benefits include enhanced service quality and broader deployment of advanced wireless services, the agency said. “The FCC believes this transaction is unlikely to result in collusive, anti-competitive behavior or create unilateral market power on the part of the merged entity,” it said: “There are no local markets where the post- merger competitive environment would require a divestiture of spectrum, networks or customers.” The FCC also concluded that in the post-merger mobile telephony market, there will be several other carriers able to act as “effective competitive constraints on the behavior of the merged entity.”
The FCC also said it will hold the merged company to its commitment that the new local wireline company, LTD Holding Co., planned to be spun off after the merger, will receive an equitable debt and asset allocation so it can be a financially secure Fortune 500 company. The Commission will be able to enforce such a commitment in the future, after the spin-off is approved by the agency, it said.
With regard to the effect of the merged entity’s accumulation of BRS/EBS spectrum in the 2.5 GHz band, the FCC said: “Because this spectrum is in an early state of transition to a new band plan and new uses by licenses, neither public interest harms nor benefits are likely to result in the near term from the merger.” The Commission said the transaction won’t have a negative impact on competition in the markets for the products that are or will be supported by this spectrum.