T-Mobile’s purchase of Sprint has to clear a Californian hurdle

by Steve Blum • , , , ,

T-Mobile, the third largest U.S. mobile carrier, needs the California Public Utilities Commission’s blessing to buy Sprint, the fourth largest. Sorta.

The Federal Communications Commission has jurisdiction over mobile carriers and is doing the heavy lifting in the regulatory review of the transaction. But Sprint has a subsidiary – Sprint Communications Company, or “Sprint Wireline” as it’s referred to – that sells services to business customers in California. As a result, the company has a certificate of public convenience and necessity (CPCN) granted by the CPUC, and needs its approval to transfer ownership to T-Mobile.

In the joint application submitted by the two companies, Sprint Wireline’s business is described as limited “exclusively to enterprise and carrier customers”. It’s no big deal, they claim…

This transfer will not have any impact on the provision of [competitive telecoms] service or competition in that market. T-Mobile does not currently provide such services and neither it, nor any of its California operating subsidiaries, are certificated [competitive telecoms service] providers. Moreover, because this is a parent-level only transaction, with no change in day-to-day operations of Sprint Wireline, the Commission will retain exactly the same regulatory authority over Sprint Wireline that the Commission possessed immediately prior to the Transaction. In addition, the Transaction is transparent to Sprint Wireline’s customers as Sprint Wireline will continue to honor its existing contractual obligations.

The key question is whether the CPUC looks at all the business that Sprint does in California – including mobile – or focuses on the much smaller wireline portion. Going large means closer scrutiny and, perhaps, conditions attached to the sale. A narrow focus on just the wireline business would likely be much less fraught.

In the past, the CPUC has either sidestepped the question, as it did with CenturyLink’s purchase of Level 3 Communications, or based its review on the big picture, and the tougher standards that entails, as it did with Charter Communications’ acquisition of Time Warner Cable’s Californian systems.

The T-Mobile/Sprint deal is different, because there’s a clearer regulatory distinction between wireline and mobile companies, and the certifications and licenses they’re required to have. The CPUC has to decide whether it’s a big enough difference to justify waving the deal through.