Belated approval of T-Mobile/Sprint deal, with a long and contested list of conditions, set for CPUC vote today

by Steve Blum • , , , ,

T-Mobile and Sprint will finally get permission to merge from the California Public Utilities Commission later today, assuming commissioners approve a revised draft decision that was posted yesterday. Nothing is guaranteed – the vote could be delayed, for example – but given that commissioners met in closed session to discuss it on Monday and yesterday’s revision is more of a refinement than a major change to the original draft, approval looks like a good bet.

The new draft sidesteps T-Mobile’s decision to close the deal without the CPUC’s blessing and Sprint’s attempt to duck out of the proceeding by abandoning its license to operate a wireline telephone business in California. The CPUC rejected Sprint’s request to cancel its certificate of public convenience and necessity (CPCN) on Tuesday and the new draft grants permission to transfer it to T-Mobile, albeit with a lot of conditions. If T-Mobile wants to get rid of the CPCN, it’ll have to go through a lengthy and formal process to do so.

No mention whatsoever is made of the 1 April 2020 transaction closing date, nor of the subsequent order issued by commissioner Clifford Rechtschaffen that forbid any merger of the two companies’ Californian operations before the commission votes to allow it. That doesn’t mean all is forgiven. The companies might – I’d guess will – face CPUC disciplinary action later.

What the new draft does do is make it crystal clear that the CPUC believes it has jurisdiction over any telephone company operating in California, wired or wireless…

Wireless carriers are “telephone corporations” and therefore public utilities under Public Utilities Code Sections 216, 233 and 234. 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.

The revised draft certainly exercises that authority. It expands on T-Mobile’s responsibilities to the Lifeline program, which provides discounted service to low income households, and maintains a requirement for T-Mobile to add 1,000 net new jobs in California, over and above what the two companies together had before they merged.

Service obligations were tweaked. T-Mobile will have to be able 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.

Testing and oversight requirements were tightened, with the job of defining and policing merger obligations more clearly assigned to the CPUC. A deal T-Mobile cut with the California Emerging Technology Fund that included a $35 million payoff and vague performance and build out obligations will have to be enforced by California courts, if at all.

This game may be over, but the series will drag on. As mentioned, there are penalties for the CPUC to consider as well as the status of Sprint’s CPCN. T-Mobile won’t head for the showers either. It has consistently rejected the CPUC’s claim of jurisdiction, and that dispute must eventually be resolved in federal court.

Proposed Decision Granting Application and Approving Wireless Transfer subject to conditions, Revision 1, 15 April 2020
Redlined version of Proposed Decision Granting Application and Approving Wireless Transfer subject to conditions, Revision 1, 15 April 2020

Links to arguments, exhibits and other paperwork filed at the CPUC and elsewhere are here.

My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary. Take it for what it’s worth.