Apollo/Lumen Deal Seen Likely to Face Little Regulatory Resistance

Apollo’s purchase of Lumen’s ILEC assets is likely to close without any major conditions from the FCC, experts said in recent interviews (see 2108030077). Both companies said they expect the $7.5 billion deal to close in the second half of 2022.

“We’re hoping to file our FCC application in the coming days,” emailed a Lumen spokesperson Friday. Lumen hasn’t filed applications with the nine states where it needs regulatory approval, said representatives for commissions in Georgia, Illinois, Louisiana, Mississippi, New Jersey, Pennsylvania, South Carolina, Texas and Virginia. Some said their state could act a few months after an application comes in. None of the agencies commented on the deal's merits. New Jersey and Illinois consumer advocates told us they’re monitoring.

The FCC is “not going to be harsh” on the companies, said CCG Consulting President Doug Dawson. Dawson compared the deal to Frontier's 2015 purchase of Verizon's wireline systems, which received commission approval without conditions (see 1509030063). Once an application is filed, the FCC will “[review] it for completeness” and seek comment, emailed a spokesperson on Friday: “Any transaction involving foreign ownership is referred to the Executive Branch for review."

The FCC may follow the FTC and “either slow-roll mergers in the short run, or start scrutinizing deals more closely,” emailed Tech Freedom General Counsel Jim Dunstan. “I would imagine that [the Communications Workers of America] will object if it entails the consolidation of staff,” Dunstan said: “That issue didn't get much headway under the [Chairman Ajit] Pai FCC in the Sprint/T-Mobile merger, but who knows under this FCC.”

CWA will be "active in the regulatory review process,” the union said in a statement. Existing collective bargaining agreements "will be in full force and effect with Apollo," it said. “CWA is committed to supporting and protecting our members during this transition,” said CWA Telecommunications and Technologies Vice President Lisa Bolton.

Some nuances may need to be sorted out regarding the CLEC assets Lumen will retain and how the customers that Apollo gains will be affected, said Render Networks Vice President-Network Deployment Frank DeJoy: “I actually see a lot of support for this.” The FCC and state regulators may hold Lumen and Apollo to its intent to focus on rural broadband and underserved communities, DeJoy said. Dawson agreed: “Probably a big number of DSL subscribers” are attached to the deal. Apollo declined to comment beyond the initial announcement of the agreement.

The South Carolina Public Service Commission’s review could take at least four months, said Office of Regulatory Staff Executive Director Nanette Edwards. Virginia State Corporation Commission rules require it to approve or disapprove 60 days after an application is filed, though the commission may extend it by up to 120 days, after which it would be deemed granted, said Information Resources Division Director Ken Schrad: “No such application has yet been filed.”

The Georgia PSC can’t estimate a time frame until an application is filed, said a spokesperson. A Louisiana PSC spokesperson couldn’t estimate a timeline because “there are indeterminate factors such as potential discovery and intervening parties.” Other state agencies also didn’t give time frames.

The New Jersey Division of Rate Counsel will advocate for customers in the Board of Public Utilities review, said Director Stefanie Brand. Since the sale involves an ILEC, “we will seek assurances that the new company understands its carrier of last resort” obligations “and that network maintenance and upgrades continue as needed,” she said. State law requires the New Jersey BPU to decide if the proposed deal would hurt competition and current or future customers and employees, interfere with providing safe and adequate services, and bring positive benefits to customers, said Brand. And the carrier must provide enough notice to customers, she said.

“In acquisitions like this, we're always concerned that customers will take a backseat to the company's bottom line,” emailed an Illinois Citizens Utility Board (CUB) spokesperson. “The trend in recent years has been for local phone companies to push for deregulation and move away from basic phone service to more expensive and less reliable options.” CUB worries Apollo will raise rates, the spokesperson said. “They say they're going to invest in broadband -- but they need to keep it affordable. Actions speak louder than words.”

At the Texas Public Utility Commission, “it is highly unlikely that the deal would run into any resistance,” said Ewell, Brown’s David Brown, a telecom attorney for municipalities. “The review authority is very limited.”