With FCC's OK, Apollo/Lumen Deal Expects Q4 Close

Lumen expects its sale of its incumbent local exchange carrier business in 20 states to Apollo's Brightspeed to close "early in the fourth quarter," pending “customary closing conditions,” the company announced Monday, after the FCC's approval last week. The companies announced the $7.5 billion deal in August 2021, with Lumen retaining ILEC assets in 16 states (see 2108030077). The deal received its final state regulatory approval from the New Jersey Board of Public Utilities in June (see 2206290041).

The FCC declined to set a "broadband deployment condition with mandated and interim timelines and potential penalties" sought by the Communications Workers of America, in an order Friday, citing the companies' "defined commitments" resulting from the deal (see 2201190063). Apollo said it will invest about $2 billion to deploy 10GB symmetrical fiber-to-the-premises network in the 20 states it will serve "over the next five years" and fiber in 17 states "by the end of 2023."

Apollo has "strong economic incentives to retain the company and complete the promised deployments in order to compete with other providers," and agreed to file "annual progress reports addressing these milestones for five years after the transaction closes," the order said. The company's planned investment is “likely to benefit low-income residential customers through improved offerings, increased competition with cable operators, and better consumer choice,” the order said. The FCC said it was "assuaged" by Apollo's commitments to "complete three million fiber passings over the next five years in all areas covered by the 20-state footprint."

Among the conditions Apollo agreed to is a commitment to continue participating in Lifeline and offer a "net $0" broadband plan through the affordable connectivity program in the 20 states it will operate in. It also gave an "explicit commitment to rely on existing service and technical personnel" of Lumen's ILEC assets "for its planned fiber buildout" without any reductions. The FCC also granted Apollo's petition for declaratory ruling to allow foreign ownership to exceed the 25% benchmark on the condition that it complies with a letter of agreement it signed with NTIA.

The approval is “great news that will bring faster broadband speeds to customers across both companies,” said Melissa Mann, Lumen vice president-public policy and government affairs. It “paves the way for Brightspeed to help close the digital divide in communities across the country that are most in need of high-quality broadband,” said Tom Dailey, Brightspeed vice president-public policy and government affairs. “This is a significant step in our journey to begin serving customers as Brightspeed,” Dailey said.

The transaction included some of Lumen's winning Rural Digital Opportunity Fund Phase I auction bids and Connect America Fund Phase II support. The deal required Lumen to meet its CAF II obligations before completing the transaction. The FCC's order said Apollo remains "financially, technically, and managerially obligated" to meet the RDOF obligations associated with Lumen's winning bids it received through the deal. About $94.6 million in RDOF support in nine of the states was subject to the transaction.