Sprint Corp. received an important endorsement for its pending acquisition of Nextel Communications Inc. as the Federal Communications Commission granted its approval for the deal, which will solidify the new Sprint Nextel Corp.’s position as the industry’s third-largest operator with more than 40 million subscribers.
According to Sprint, the FCC approval completes all required regulatory hurdles, and the carriers expect to close the deal shortly.
Sprint spokesman James Fisher said that the company still is waiting for the official order on the approval, which is expected to be released this week, as well as tying up some legal questions regarding the stock-exchange rate, which could take another couple of weeks. Sprint repeatedly has said it expects the deal to close during the third quarter.
“The FCC concluded today that Sprint’s acquisition of Nextel’s licenses will serve the public interest, convenience and necessity, and that the likely public-interest benefits of the merger outweigh any potential public-interest harms,” the FCC wrote in its approval.
In approving the transaction, which was first announced last December, the FCC did not require either carrier to divest spectrum, network assets or customers. The government agency noted that there will continue to be “several other carriers with the ability to add subscribers and act as effective competitive constraints on the behavior of the merged entity.”
The approval included the change of control of all licenses and authorizations held directly and indirectly by Nextel to Sprint, including specialized mobile radio licenses in the 800 MHz and 900 MHz bands and licenses in the 1.9 GHz band that are part of Nextel’s rebanding efforts.
According to a UBS Warburg report from earlier this year, Sprint Nextel will control nearly 51 megahertz of spectrum in the 800 MHz, 900 MHz and 1.9 GHz bands across the country’s top 100 markets. The same report noted that the industry’s largest operator, Cingular Wireless L.L.C., controls 57.3 megahertz of spectrum, No. 2 Verizon Wireless controls 40.4 megahertz of spectrum, and smaller rival T-Mobile USA Inc. an average of 27 megahertz across the top 100 markets.
The FCC also approved the transfer of control of all broadband radio service licenses in the 2.1 GHz and 2.5 GHz bands and the leases of education broadcast service spectrum in the 2.5 GHz band. Several EBS groups had lobbied the FCC to force the merged entity to divest the EBS spectrum. Sprint Nextel now will control spectrum in the 2.5 GHz band covering nearly 80 percent of the country.
“The commission believes that this transaction will not have a negative impact on competition in the markets for the products that are or will ultimately be supported by this spectrum, whether they be voice, broadband, video or other wireless services offered on a mobile, fixed or portable basis,” the FCC wrote.
Sprint Nextel has said it is looking at launching advanced wireless broadband services using its 2.5 GHz spectrum and recently initiated network trials using several wireless broadband standards.
The FCC added that it will require Sprint Nextel to fulfill a voluntary commitment to meet certain milestones for offering service in the 2.5 GHz band-including plans to cover at least 15 million potential customers with service within four years and another 15 million pops within six years-“unless circumstances beyond its control prevent the merged entity from reaching those milestones.”
The FCC also said it will hold Sprint Nextel to its plan to spin off its local wireline business, which Sprint previously said it expects to accomplish next year.
Sprint also managed to tie up a nagging loose end last week as it entered into a forbearance agreement with wireless affiliate UbiquiTel Inc., which will halt the affiliate’s attempts to seek injunctive or equitable relief from Sprint in connection with Sprint’s pending acquisition of Nextel. UbiquiTel filed a lawsuit against Sprint last month claiming the pending acquisition would violate terms of UbiquiTel’s affiliate agreement.
As part of the agreement, Sprint has agreed to not use Nextel’s network or spectrum, including the G block 1.9 GHz spectrum Nextel is receiving from the FCC as part of its spectrum realignment plan, in UbiquiTel’s service areas to offer CDMA services. Sprint also said it will not offer dual-mode CDMA/iDEN handsets in UbiquiTel’s service areas unless the CDMA portion of the handset is programmed to use UbiquiTel’s network on a first-priority basis rather than using the iDEN network in its service areas.
The agreement also includes several provisions designed to protect UbiquiTel’s CDMA customer base from competing iDEN services that will be offered by Nextel in UbiquiTel’s service area. The terms include promotional material, billing and subscriber records, customer-care and migration services, and network performance reports.
In addition, the agreement calls for Nextel affiliate Nextel Partners Inc. to adhere to terms of the deal should Sprint gain a controlling interest in Nextel Partners. Nextel currently controls 32 percent of its affiliate, which has recommended that its shareholders exercise their put option following Sprint’s acquisition of Nextel, forcing Nextel to acquire the remaining interest in Nextel Partners that it does not already own.
Sprint reported earlier this month agreements with wireless affiliates iPCS Inc., Horizon Personal Communications Inc. and Bright Personal Communications Services L.L.C. under which the affiliates would not seek injunctive or equitable relief against Sprint or Nextel in exchange for Sprint not revealing operational information about the affiliates to Nextel.
The iPCS agreement calls for Sprint to modify its branding campaign in the affiliates’ markets and gives the companies until Jan. 1 to work out any potential modifications to the affiliate arrangements. More importantly for Sprint, the agreement removes a temporary restraining order that prevented Sprint from sharing certain information with Nextel ahead of their deal, which could have delayed Sprint’s acquisition of Nextel.
Sprint announced last month that it was acquiring disgruntled affiliate US Unwired Inc. for $1.3 billion. Both companies were in the midst of court proceedings brought by US Unwired against Sprint claiming the pending acquisition of Nextel would violate portions of its affiliate agreement. The Federal Trade Commission last week signed off on that deal, which also is expected to close during the third quarter. RCR
