T-Mobile Expected to Migrate Sprint Customers, Complete Transition In 2023

T-Mobile US said Wednesday it “officially completed” buying Sprint and its CEO transition, with Mike Sievert replacing John Legere ahead of schedule. Analysts expect a relatively smooth transition, much quicker than that which followed Sprint/Nextel 15 years ago. The deal got final federal signoff with the Tunney Act clearance by the U.S. District Court in Washington, hours after the carriers said they finished combining (see 2004010018). DOJ welcomed the decision.

A ranking California state senator raised concerns about the carriers closing without California Public Utilities Commission approval amid a public health crisis. The companies didn't comment.

“Any time businesses try to avoid regulations that are designed to protect the public interest, I look at it with an extremely jaundiced eye,” California Senate Judiciary Committee Chair Hannah-Beth Jackson (D) said in an interview. She will examine the case because and has been focused on COVID-19. Jackson wouldn’t be surprised if the state pursues the matter if the CPUC, legislature or governor believes it improper or contrary to California law, she said. Anyone who tries to “take advantage” of the public crisis “should be severely punished,” she said.

“With 14 times more capacity in six years than standalone T-Mobile has today, the New T-Mobile network will be able to offer unmatched value to consumers, with better service at lower prices,” T-Mobile said. The company credited Legere with overseeing a turnaround that “completely disrupted the wireless industry” as T-Mobile became “the fastest growing company in wireless.”

The integration starts now and will be complete by mid-2023, New Street’s Jonathan Chaplin told us: “They will complete it quicker if they can. The process will look nothing like Sprint/Nextel, which was a true integration. In this case, the subs and spectrum get moved over to the T-Mobile network, and Sprint gets shut down. There will be little if anything left of Sprint after the middle of 2023.”

The integration will happen in stages, Chaplin said. All new subscribers will be put on the T-Mobile network and T-Mobile will deploy Sprint’s fallow spectrum on its network “to create capacity to absorb the subs,” he said. Next, T-Mobile will take on Sprint subscribers with handsets compatible with the combined network, then “move over subs that don’t have compatible handsets through the normal upgrade process,” he said: “When the residual base is low enough they will flash cut what is left, and likely lose a bunch.”

“The best thing for T-Mobile is to follow the MetroPCS playbook,” emailed Roger Entner of Recon Analytics. “The key here is not to integrate but to migrate the customer base to the T-Mobile network and infrastructure. All new customers will be added to the [T-Mobile] network and the [Sprint] network gets phased out.” A remaining issue is how quickly Dish Network will do the same since it has a seven-year roaming deal and three years on the Sprint network. Dish is getting divested assets. Sprint's "network will be gone in 3 years,” the analyst predicted: “This will happen as Covid is hopefully only a temporary issue or at least we learn how to deal with it.”

COVID-19 “has caused everything to slow down, at least to some extent, so it wouldn't be surprising if the pandemic caused some delays,” said Jeffrey Westling, R Street Institute fellow. This could be “an opportune time” for T-Mobile to act quickly on any infrastructure changes, he said. “Local governments may use the fact that their citizens are staying home to open up local rights-of-ways and grant construction permits, as the work will not have the usual impact to traffic and congestion.”

Bucking CPUC

T-Mobile promised to honor 50 voluntary California commitments but not any new conditions from the CPUC’s proposed decision. In a Tuesday evening letter to the CPUC in docket A.18-07-011, Sievert asked the agency to revise its proposal and vote on it at its April 16 meeting as planned. The new CEO noted the company has cooperated for 20 months even though “our abiding view that the Commission lacks jurisdiction over this transaction.” The executive also cited the fallout from the coronavirus.

“The companies ... cannot take the risk of waiting any longer to consummate the merger,” Sievert wrote assigned Commissioner Cliff Rechtschaffen and Administrative Law Judge Karl Bemesderfer. “The COVID-19 crisis has created unprecedented uncertainty and risk in the financial markets, including the debt markets that are critical for us to secure the required financing for the merger and our 5G network build-out,” Sievert said. “If we do not close the transaction on April 1, it is conceivable that we may never be able to do so.” The carrier set that date as its target in February (see 2002200066).

The CPUC didn’t comment Wednesday, the deadline for comments on the proposed decision. A California Attorney General Xavier Becerra (D) spokesperson declined comment, telling us to ask the CPUC since it’s an independent agency. Gov. Gavin Newsom (D) didn’t comment.

The carriers' actions "show their intent to circumvent CPUC oversight, resulting in little to no effective mitigation of the harms caused by the proposed merger," emailed Ana Maria Johnson, CPUC Public Advocates Office communications program manager. PAO operates independently. It's "further proof and a red flag that compliance to any merger condition ... will be taken lightly and challenged by the companies," Johnson said: The CPUC has jurisdiction to hold T-Mobile and Sprint "accountable for undermining the CPUC's role in protecting California consumers."

Groups protested Sprint's relinquishing its state wireline certificate, one of two Monday moves that laid the foundation for the early deal completing (see 2003310062). The Utility Reform Network (TURN) and Greenlining Institute urged the commission to reject the advice letter and “provide regulatory certainty regarding the Commission’s jurisdiction over VoIP services” and the transaction. Sprint’s arguments “raise extremely complicated issues of both fact and law, do not properly reflect the current status of federal and state law, and fail to address the impact” on T-Mobile/Sprint, they said Wednesday. Require Sprint to file an application first, they said.

Aides to CPUC President Marybel Batjer plan to teleconference Monday with PAO, TURN and Communications Workers of America, said PAO.

“The Commission fails to recognize the limitations on its jurisdiction over wireless transfers of control,” and incorrectly asserts that more conditions are needed, T-Mobile and Sprint commented on the proposed decision: “The PD erroneously asserts that the Commission has the authority to ‘approve the Merger’ and impose conditions as a prerequisite to granting such approval. Both assertions conflict with federal law and the Commission’s own precedent.” Monday's moves to withdraw the company’s wireline transfer-of-control application and surrender Sprint Wireline’s state certificate meant the agency “no longer has jurisdiction over the transfer of Sprint Wireline,” it said.

The CPUC may not rely on a California AG opinion submitted to the commission that disagrees with the U.S. District Court for the Southern District of New York decision to reject state AGs’ lawsuit, commented T-Mobile and Sprint: Becerra didn’t appeal the SDNY decision (see 2003110043). “Neither the Commission nor the AG can now use this proceeding to relitigate -- or reassert -- claims the SDNY rejected, and the AG has now relinquished,” the companies said.

'Finally!'

Finally!” tweeted Commissioner Mike O’Rielly, noting the review took almost two years: “Should have been done quicker, with fewer restrictions, & without broken State reviews. But I look forward to seeing new T-Mobile challenge market & bring exciting advances to consumers.”

Not everyone is convinced the transaction will be good for consumers. “Appropriate that this tweet was sent on April Fool's Day,” responded Brett Glass, owner of Wyoming wireless ISP Lariat: “It's a disaster. There is now a cellular triumverate. Shameful.”

“Today's closing ... will accelerate the deployment of key mid-band spectrum in the 2.5 GHz band for 5G,” tweeted FCC Chief of Staff Matthew Berry: “This will be good for American consumers, especially in rural areas, as well as U.S. leadership in 5G.” FCC Chairman Ajit Pai also cheered.

Dish is now "one step closer to becoming the nation’s fourth facilities-based wireless carrier," the satellite company emailed. “We are committed to bringing full, standalone 5G to America, built upon a secure, Open Radio Access Network (OpenRAN) architecture, delivering unparalleled innovation." Dish anticipates "delivering lower prices and increased competition in the prepaid market.”​ It's getting Boost prepaid assets in a divestiture.

S&P reduced its rating on T-Mobile unsecured debt Wednesday from BB-plus to BB to account for “weaker credit metrics.” The firm “removed all ratings from CreditWatch, where they were placed with negative implications on April 30, 2018.”

Our earlier news bulletin about the completion of the deal is here. Our earlier article about the companies' plans is here. (Communications Daily is putting coronavirus-related news in front of its pay wall.)