FCC Approves SoftBank/Sprint/Clearwire Deal

"After thorough review, the Commission has found that the proposed Softbank-Sprint-Clearwire transactions would serve the public interest,” said acting FCC Chairwoman Mignon Clyburn. “The increased investment in Sprint’s and Clearwire’s networks is likely to accelerate deployment of mobile broadband services and enhance competition in the mobile marketplace, promoting customer choice, innovation and lower prices.” The order found the indirect foreign ownership of Sprint complies with Section 310 of the Communications Act, said Clyburn. “I am pleased that the Commission was able to act in a timely manner, voting to adopt an order within two weeks of the parties providing the Commission notice of the revised terms of their transactions.”

"With our action today, SoftBank can consummate its $21.6 billion acquisition of Sprint, and Sprint’s $3.7 billion acquisition of the outstanding shares in Clearwire can move forward,” Pai said. “I'm pleased that today’s order rejects conditions that aren’t transaction-specific. That result is especially meaningful here, where the total amount of mobile broadband spectrum attributed to Sprint did not change as a result of the transaction. This will be an important precedent as we consider other spectrum-related transactions.” Pai noted that the order was circulated, his objections addressed and a vote completed within a one-week timeframe. “Our prompt disposition of this matter underscores the importance of codifying the 180-day shot clock in our rules,” he said. “Even though we quickly reviewed this order and rendered judgment, we still exceeded our self-imposed deadline by 35 days. Codifying the deadline would help us meet it, which in turn would give the parties and the public more confidence that the agency is acting with dispatch."

"Just two years ago, the wireless industry was at the doorstep of duopoly,” said Sprint CEO Dan Hesse. “But with these transformative transactions, we are one step closer to a stronger Sprint which will better serve consumers, challenge the market share leaders and drive innovation in the American economy.”

Verizon Vice President Tamara Preiss raised spectrum concerns in calls with Wireless Bureau Chief Ruth Milkman and aides to Pai, said an ex parte filing. The BRS/EBS spectrum “meets the standard for inclusion in the mobile services spectrum screen: not only is it both suitable and available for those services (the test for inclusion), it is in fact in use,” Preiss said (http://bit.ly/127tTNL). “If, however, the Commission accepts the applicants’ view that this transaction does not trigger application of the spectrum screen, then the Commission ... should adopt a narrow order that makes clear that it is deferring consideration of ... this issue to the Mobile Spectrum Holdings proceeding."

AT&T Vice President Joan Marsh said the FCC was wrong not to order Sprint to divest spectrum. “In fact, Clearwire’s 2.5 GHz spectrum portfolio is so valuable that in recent weeks it set off a bidding war,” she said in a written statement. “In late May, Dish Network raised its bid for Clearwire to $4.40/share, representing a 29 percent premium over Sprint’s revised offer of $3.40, causing Sprint to revise its bid once again to $5/share. This makes clear how valuable -- and pivotal to the deal -- the 2.5 GHz spectrum portfolio really was. This value was also readily recognized by analysts commenting on the deal. Baird Equity Research noted that gaining full access to Clearwire’s almost 140 MHz of nationwide spectrum provides significant bandwidth opportunities and solves Sprint’s spectrum shortage. And Clearwire itself has long publicly touted the value of its approximately 140 MHz of spectrum on average across its national footprint and up to 160 MHz of spectrum on average in the 100 largest markets."

The Roman Catholic Diocese of Erie, Pa., and the Consortium for Public Education made a similar point in a letter to the commission. “If the EBS/BRS spectrum currently being used for mobile broadband is not included in the screen in this transaction, it would be an abrogation of the public interest and the Commission’s responsibility to fail to apply the rules evenly to all carriers and in all merger transactions,” they wrote (http://bit.ly/17SvdII). “If the appropriate amount of EBS/BRS is included in the screen, the Commission must determine that broad scale divestitures are required based on the sheer amount of mobile spectrum that would be controlled by the post-merger entity (about 220-250 MHz per market), and condition the approval of the transaction accordingly."

The FCC addressed the spectrum concerns raised by Verizon and others as review was under way. “The Commission generally has considered 55.5 megahertz of BRS spectrum relevant to its competitive analyses in past transactions,” the order stated. “However, even if we were to consider relevant to our competitive analysis Sprint/Clearwire’s total holdings of BRS and EBS spectrum, we still would find, in response to these arguments, that the increase in Sprint’s interest in Clearwire’s spectrum holdings would be unlikely to result in substantial competitive harm, as discussed below."

"The increase in Sprint’s interest in Clearwire’s 2.5 GHz spectrum holdings does not raise substantial competitive concerns,” the order said. That’s based on “a combination of factors” including that “the proposed increase in Sprint’s interest in Clearwire is unlikely as a matter of fact to reduce competitors’ access to 2.5 GHz spectrum,” said the order. That’s because “Clearwire’s current revenue stream already is almost entirely derived from Sprint, with competitors to Sprint generally not using Clearwire’s spectrum to deploy advanced broadband technologies or mobile broadband service offerings,” the order said. The order cited availability of other bands such as AWS-1 to rivals of Sprint “with similar technical characteristics and without the challenges to deploying a mobile broadband network that the Commission previously found to exist in the 2.5 GHz band (e.g., co-existing with high power adjacent video operations in the middle band segment, and aggregating spectrum by leasing excess capacity from site-based EBS licensees that have a separate educational mission).”