T-Mobile goes nuclear in California, preps to close Sprint deal without CPUC’s blessing

by Steve Blum • , , , ,

Slim pickens rides the bomb

T-Mobile and Sprint asked to withdraw their application for California Public Utilities Commission approval of the wireline elements of their merger agreement yesterday. At the same time, Sprint sent the CPUC a letter “relinquishing its [California] certificate of public Convenience and necessity” (CPCN). That sets the stage for the two companies to close their deal without CPUC permission, perhaps as soon as tomorrow, which is the day they’ve been targeting all along. It also provides a basis for challenging, if not ignoring completely, any conditions the CPUC might impose on them, such as those proposed in a draft decision that commissioners are scheduled to consider on 16 April 2020.

T-Mobile and Sprint have two requests pending with the CPUC. They’re asking for permission to transfer Sprint’s wireline CPCN – its authorisation to operate as a telephone company in California – to T-Mobile, and they’ve notified the CPUC that they plan to combine their mobile wireless operations. The commission bundled those two matters into a single case, something that T-Mobile (and Sprint, but it’s T-Mobile running the show) objected to all along.

The CPUC’s jurisdiction over the wireline asset transfer is very clear, but it is uncontroversial. The far bigger mobile side of the deal is what opponents – including California attorney general Xavier Becerra – are worried about and what the proposed conditions directly address.

The CPUC’s authority over a mobile carrier is murky at best. Mobile licenses are issued by the Federal Communications Commission, which approved the transfer. Carriers have to register their federal licenses with the CPUC, but arguably – at least if you’re T-Mobile – that’s just an informational filing, with no state-level regulatory review needed or allowed.

T-Mobile’s lawyers have been making that argument all along, and threatened more than once to go ahead with the merger without waiting for a decision from the CPUC. Taking the wireline issue off the table will make that far easier to do.

T-Mobile can’t simply say never mind. The CPUC can deny, or ignore, the motion to withdraw the wireline transfer application, and there’s potentially months of wrangling ahead over Sprint’s abandonment of its CPCN. But once the transaction is closed, it’ll be difficult to unwind, even if yesterday’s gambit is ultimately rejected by a court. We might know as soon as tomorrow whether the companies will try to cowboy it out and complete the merger while the CPUC is chewing it over.

Motion of Joint Applicants to Withdraw Wireline Application, 30 March 2020
Sprint Communications Company – Tier 1 Advice Letter Relinquishing Certificate of Public Convenience and Necessity, 30 March 2020

Links to arguments and exhibits 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.