FCC Lets Verizon Buy Verizon Wireless, as Streamlined Foreign OK Not Seen Affecting Broadcast M&A

But the speed of the foreign ownership approval, lack of opposition to the deal and no conditions on it won’t likely characterize initial staff rulings on future M&A of radio and TV stations where non-U.S. holdings exceed a quarter under new rules approved last month, said industry officials. They said that’s because the order clarifying that foreign stakes above 25 percent in broadcasters won’t be automatically blocked doesn’t necessarily pave the way for speedy or streamlined approval. Yet some M&A backers said they hold out hope that eventually the way non-broadcast ownership is treated by the commission will apply to broadcast deals, too.

"In the first action applying new foreign ownership rules meant to reduce red tape and facilitate international investment in U.S. wireless networks,” the foreign ownership ruling approved Verizon Communications buying Vodafone’s stake in Verizon Wireless, said an FCC news release (http://bit.ly/IEJD75). “The actions by the International Bureau, Wireless Telecommunications Bureau, and Office of Engineering and Technology came just over one month after the public comment period closed on the petition,” it said. Verizon petitioned Sept. 6 for a declaratory ruling letting foreigners own more than 25 percent, saying the threshold will rise from 8.2 percent now to 24-25 percent after the deal, according to the International Bureau’s declaratory ruling (http://bit.ly/IIl2yv).

It’s an “excellent example of the type of process reform the FCC is seeking to accomplish,” where the bureau quickly issued a declaratory ruling after completing a public interest review, said Chief Mindel De La Torre. “We thank the FCC for its quick action,” said Verizon General Counsel Randall Milch in a news release (http://vz.to/1g7zj6x). It “marks the first use of the streamlined foreign-ownership review procedures that the FCC adopted earlier this year, and we are grateful to the commission for its commitment to process reforms that benefit wireless carriers and the customers we serve,” he said. The Wireless Bureau and Office of Engineering and Technology granted pro forma transfers of control of Verizon Wireless non-common carrier applications that don’t “need prior approval, and notification of these pro forma transfers will be made after closing of the transaction,” said the FCC news release. Vodafone had no comment.

The International Bureau saw “no persuasive reason to delay” acting on the foreign ownership request as NTCH requested in contending the FCC should limit the time of such rulings and act on the small Southern carrier’s request that the agency first decide on its petition for reconsideration related to lack of alien ownership forbearance for the bigger company, said the bureau. “As Verizon points out, its petition concerns solely its prospective level of foreign ownership following the proposed transaction.” As the acquirer also “notes, the Commission has a long-standing practice of issuing foreign ownership rulings of unlimited duration, which is now reflected in the rules it adopted in” April, said the bureau. “It would be inappropriate to revisit that practice here, and NTCH provides no basis for doing so."

It would make sense for the FCC to limit foreign ownership threshold requests to five or 10 years rather than continuing to make them indefinite, said wireless lawyer Don Evans of Fletcher Heald, who wrote the NTCH filing that was the sole comment (http://bit.ly/1jmPVa0) on Verizon’s petition. “You wouldn’t want it to be too short, for a thing like this, but to just leave it of infinite duration seems to me to not be good public policy,” he said in an interview. “It wouldn’t be that big a deal, every five or 10 years, just as with license renewals.” The agency’s requiring petitions for declaratory ruling on non-American stakes be made periodically means that if a “friendly country” at the time an earlier ruling was granted no longer is so, the FCC could account for that, said Evans. His client has wireless subscribers in South Carolina and Jackson, Tenn.

It’s been relatively easy in recent years for companies overseen by the FCC, other than broadcasters, to get the agency’s nod to exceed the 25 percent foreign ownership threshold in Communications Act Section 310(b)(4), said those backing and opposing M&A in interviews. “We've accepted that foreign ownership on the non-broadcast side is not a big deal, which is not surprising, given we've spent” several decades trying to get other countries to open up their telecom and other markets, said Public Knowledge Senior Vice President Harold Feld. “Broadcast has always been the holdout,” with a “long tradition” going back to when the FCC was started, he said. It’s “important” for the FCC to require companies make requests such as what Verizon sought so that the agency can ensure such deals truly are pro forma, said Feld.

"That the foreign ownership approval process has been relatively straightforward in other industries is a good harbinger for having” foreign broadcast investment eventually mainly “handled in a fairly routinized way,” said Minority Media and Telecommunications Council Executive Director David Honig, who for years sought the foreign broadcast clarification. “The streamlining speeds up everything,” he said of April’s order for non-broadcast properties. “Much of the already streamlined foreign ownership procedures” in other industries with last month’s ruling now will apply to broadcasting, said Honig.

FCC Chairman Tom Wheeler’s caveats on foreign broadcast ownership, which he mentioned at the Nov. 14 FCC meeting where he voted for the declaratory ruling (http://bit.ly/1cXO073), may mean such deals will have a hard time getting approval, said broadcast lawyer David Silverman of Davis Wright. “I'm not sure that order would have come out if he had been chairman all along” instead of voting for the ruling at his first meeting as chief, said Silverman, who represented Alaskan broadcasters backing such a clarification. “I wouldn’t hold out much hope of that happening in the near future” under Wheeler, Silverman said of foreign broadcast deals, though he hopes they will be OK'ed. “Whatever he thinks,” he said of Wheeler, will probably have more import on such transactions “than whatever they would do in the wireless context.” -- Jonathan Make (jmake@warren-news.com)