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Sprint, T-Mobile Still Need OK From California Utility Regulator

Feb. 11, 2020, 5:52 PM

T-Mobile US Inc. and Sprint Corp. cleared their biggest hurdle Tuesday in defeating a multistate lawsuit to block the $26.5 billion merger, but several smaller obstacles remain.

One potential roadblock is the California Public Utility Commission, which has yet to bless the review.

The combined company would be prohibited from operating in the nation’s most populous state if the regulator rejects the deal, an outcome that would likely lead to more litigation, said Gigi Sohn, a former Democratic FCC official who opposes the merger.

The California regulator, which hasn’t set a date for a vote, has until July 12 to make its decision. The CPUC could vote on the deal at its March 12 meeting, Blair Levin, policy advisor at New Street Research, said in a Tuesday note.

“Now that the trial court has ruled, there will be significant pressure for the CPUC to act,” Levin said.

T-Mobile serves about 8.8 million customers in California, while Sprint has about 6.6 million in the state, according to the California Public Advocates Office, which opposes the tie-up.

Even if the CPUC votes against the deal, the companies would stand a good chance of a court overturning that rejection, Levin said.

Sohn said California may try to exact concessions from the companies before agreeing to back the merger. Nevada, Texas, and Colorado dropped their opposition after obtaining such sweeteners from the companies as improved rural wireless networks and donations to state philanthropies.

T-Mobile and Sprint have gotten approval from 18 of the 19 state utility commissions with a say in the deal. California remains the outlier.

Additional Scrutiny

The Department of Justice’s July settlement approving T-Mobile’s acquisition of Sprint also continues to face scrutiny from a Washington, D.C., federal judge.

Sprint and T-Mobile are waiting on U.S. District Judge Timothy Kelly to sign off on the government settlement, which requires both telecom companies to divest assets. Those include spectrum and Sprint’s pre-paid brand in order to establish Dish Network Corp. as a new wireless competitor.

The DOJ’s settlement has been under court review since the summer. Federal courts review DOJ merger settlements under the Tunney Act to ensure they’re in the public interest.

It’s possible Kelly could require an evidentiary hearing into the settlement, a move that another U.S. district judge required in the case of Justice’s 2018 signoff on CVS’s $69 billion deal with Aetna.

CVS was forced to halt its integration of Aetna’s assets until the court approved the settlement in September. So far, Kelly has accepted legal filings from academics, economists, and other interested third parties who oppose the merger.

Incoming T-Mobile CEO Mike Sievert said he expects to close the deal as early as April.

The merger also faces a legal challenge from the Communications Workers of America, which argues that the Federal Communications Commission exceeded its statutory authority in approving the deal. That case is pending before the U.S. Court of Appeals for the D.C. Circuit. Oral arguments have yet to be scheduled.

The cases are: US v. DEUTSCHE TELEKOM AG, D.C. Cir., No. 1:19-cv-02232, filed 7/26/19 and Communications Workers of America v. USA, D.C. Cir., No. 19-01254, filed 12/5/19.

To contact the reporters on this story: Jon Reid in Washington at jreid@bloomberglaw.com, Victoria Graham at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Melissa B. Robinson at mrobinson@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com, Mike Ferullo at mferullo@bloomberglaw.com

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