T-Mobile USA foreign ownership dust-up ‘much ado about little or nothing’: FCC re-examination centers on small wireless carrier owned by T-Mobile USA, Verizon Wireless

German giant Deutsche Telekom AG’s $30 billion purchase of what is now T-Mobile USA Inc. is not at issue in the Federal Communications Commission’s re-examination of a narrow foreign-ownership issue involving a small wireless carrier jointly owned by the No. 4 cellular operator and Verizon Wireless, according to industry and government sources.
The ownership situation came to light following media reports of the issue.
The FCC recently notified T-Mobile that its 30% non-controlling interest in Wireless Alliance L.L.C. – the latter entity 70% controlled by Verizon Wireless – appears to violate a 20% foreign-ownership cap under one statute even though the agency approved the business arrangement under a more liberal legal provision governing foreign ownership when approving the DT acquisition seven years ago.
The FCC asked T-Mobile to respond by Nov. 17 on how it planned to address the matter. The commission was prompted to pursue the issue after a similar issue arose in its review of Verizon Wireless’ $28 billion purchase of Alltel Communications L.L.C. The FCC is expected to approve the deal tomorrow. Verizon Wireless is 45% owned by the U.K.’s Vodafone Group.
The Department of Justice last week signed off on the Verizon Wireless-Alltel merger, but it will require the divestiture of 100 overlapping markets.
T-Mobile claims the foreign ownership matter has been overblown, saying it is baffled by the FCC’s Oct. 17 letter.
“The FCC is not questioning DT’s ownership of T-Mobile or T-Mobile’s corporate structure, which has been approved by the FCC numerous times since 2001,” said Tom Sugrue, VP for regulatory affairs at T-Mobile. “This inquiry concerns only T-Mobile’s 30% minority, non-controlling interest in Wireless Alliance, a small rural carrier controlled by Verizon. In particular, it addresses not the propriety of T-Mobile’s holding an interest in this small carrier, but arcane details of exactly how that interest is held. The inquiry is limited in nature and has no impact on any other T-Mobile USA interests or holdings. The FCC letter acknowledges itself that this holding was approved in 2001. While we are perplexed by the FCC legal analysis, we nonetheless believe the matter is easily resolvable by Wireless Alliance. This is much ado about little or nothing, and has no practical impact.”
The FCC has the discretion under the more relaxed statute to actually allow 100% foreign ownership in a U.S. wireless carrier, with deference given to acquiring firms located in countries – like Germany – that are members of the World Trade Organization.