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cell phones. (UCHealth)

California Holds Up Major Sprint-T-Mobile Merger Deal

CPUC claims the merger needs approval under state law, despite FCC and court approval

By Evan Symon, April 3, 2020 2:56 pm

The merger between phone companies Sprint and T-Mobile continued to be held up in California this week despite growing pressure and U.S. approval being finalized on Wednesday.

One final hurdle for the merger in California

T-Mobile CEO Mike Sievert. (Twitter)

The proposed merger was supposed to have been settled on April 1st.  After banks told Sprint and T-Mobile on Monday that they only had until then for final consolidation due to debt buyers being disrupted by the coronavirus pandemic, both companies stepped up their efforts.On Wednesday it was finalized with hours to spare.

New T-Mobile CEO Mike Sievert explained the urgency in a letter to California Public Utilities Commission (CPUC) earlier this week.

“The market for investment grade long-term debt financing, upon which our longstanding plans relied, has witnessed unprecedented upheaval in recent weeks,” explained Sievert. ‘As a result, we are forced to rely on short-term bridge financing that was secured from a group of lenders under an existing conditional commitment.

Right now, as I write this, we are fortunate that the banks are still prepared to provide bridge financing for an April 1 close. With the continuing turmoil in the financial markets, however, there are no assurances that the banks will continue to be able to fund the transaction if the closing is delayed any further. In short, if we do not close the transaction on April 1, it is conceivable that we may never be able to do so.”

Remaining issues in California

However, even with the merger seemingly being complete, their largest market, California, still has not given the merged company the green light.

CPUC has said that the merger will not be happening between their California companies until they make a decision. While CPUC has proposed approval, they still haven’t vote for it. The vote is due to be held on April 16th.

There are still a few large hold ups in the deal in California. One reason, which California Attorney General Xavier Becerra called “depriving consumers of the benefits of competition and driving up prices for cell phone services”, was the crux of around a dozen states arguments on holding back on allowing the merger in a lawsuit last year. The merger would also close over 1,500 stores in the state during a time when unemployment is reaching new highs in the state, and effect that is having some lawmakers wince. But the main argument according to CPUC is that both Sprint and T-Mobile both have companies in the state that are public utility corporations and thus fall under CPUC, not federal, rules.

T-Mobile and Sprint have tried to argue that wireless services are not covered under CPUC. But, as of Friday, California has continued to hold their ground with T-Mobile acknowledging potential issues in California.

Merger remains in question despite federal approval

“Both companies ignored state approval and focused by and large on federal approval,” said phone service consultant Francine Hanson. “When the FCC approved the merger in November, they thought that was the end of it. And in February, when the judge approved the merger, that was the final nail in the coffin.

California itself dropped the lawsuit last month to prevent the merger. All of those dominoes fell and everyone thought CPUC would too, but they didn’t. Now, T-Mobile may power through and continue merging anyway, but this is going to cause problems in California. If they don’t approve, there is a real argument that it may supersede some federal laws due to being listed as a state, and not federal, public utility.

Now everyone has to go to court over it. This is a really tricky area both sides are in. For T-Mobile it is a done deal, and for California they are pressing those open questions for state approval. Chances are the merger will go on no matter what, but the state has real power here to mess it up for all involved.”

Final CPUC and T-Mobile approval is expected in California by Mid-April.

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