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T-Mobile is already trying to get out of merger conditions imposed by state regulators in California less than three months after completing its acquisition of Sprint.
T-Mobile yesterday filed a petition with the California Public Utilities Commission (CPUC), asking the agency to provide two extra years to meet 5G build-out requirements and to eliminate a requirement to add 1,000 new employees. T-Mobile, which had agreed to other conditions imposed by the federal government, completed the Sprint merger on April 1 without waiting for California’s approval. T-Mobile claimed the state has no jurisdiction over wireless transactions. CPUC, which says it does have jurisdiction, imposed conditions when it approved the merger on April 16.
T-Mobile’s petition to CPUC could be a prelude to a lawsuit against California if the carrier doesn’t get what it wants. On 5G, T-Mobile’s petition targets a condition requiring average speeds of 300Mbps to 93 percent of California by the end of 2024. T-Mobile asked the CPUC for an extra two years to comply, saying it should have until the end of 2026. T-Mobile claims the 2024 date was a mistake “because the 2024 date was a proxy—used [by T-Mobile] at the beginning of the regulatory approval process in 2018—for the period ending six years after closing (which of course occurred in 2020).” Changing the deadline to 2026 would bring the condition “in line with the company’s network model, which includes coverage projections for three- and six-year periods from close,” T-Mobile said.
T-Mobile also asked the CPUC to rely on Federal Communications Commission drive testing to confirm compliance with network expansion requirements instead of imposing its own testing requirements. The CPUC’s plan to do its own drive testing “is duplicative and unnecessary, and will inevitably result in regulatory uncertainty and potentially inconsistent testing results (which would raise federal preemption concerns),” T-Mobile wrote.
T-Mobile wants to eliminate hiring condition
T-Mobile lodged a stronger objection to the hiring condition, saying the state order “should be modified to eliminate the mandate for T-Mobile to increase the number of full-time T-Mobile employees.” T-Mobile said that it “took the unprecedented step of voluntarily committing that there would be at least the same number of T-Mobile employees in California three years after the transaction’s closing as Sprint, Assurance Wireless, and T-Mobile had as of the date of the transaction’s closing.” But the CPUC instead issued a “mandate that T-Mobile must increase, within three years of the transaction’s closing, its net full-time jobs in California by a thousand jobs more than the current full-time jobs of Sprint, Assurance Wireless, and T-Mobile,” the petition said.
“The commission simply does not have the authority to require a wireless carrier to hire a particular number of employees in a given time period,” T-Mobile wrote. “The legislature has never granted it such authority and, prior to the issuance of the decision, the Commission has not attempted to impose such a mandate on any other communications provider in any context.” T-Mobile also said the condition is “particularly burdensome and unjustified in light of the current COVID-19 crisis.”
The CPUC’s order pointed to the commission’s authority under state law to impose conditions in order to ensure that a merger is “in the public interest.” Under that law, the CPUC can consider whether mergers “maintain or improve” quality of service to customers and “the quality of management of the resulting public utility doing business in the state.” The law says mergers should also be “beneficial on an overall basis to state and local economies,” and “fair and reasonable to affected public utility employees, including both union and nonunion employees.”
T-Mobile already laying off Sprint employees
T-Mobile could cut jobs and still comply with the order as long as it ends up with a net gain of 1,000 employees across the state. T-Mobile has already begun laying off hundreds of Sprint employees. In April 2019, then-CEO John Legere wrote that, nationwide, “T-Mobile will have more than 11,000 additional employees on our payroll by 2024 compared to what the combined standalone companies would have.” T-Mobile currently says it plans to “hire 5,000 new employees over the next year.”
T-Mobile CEO Mike Sievert said the 5,000 new employees will be in positions such as retail and engineering, The Wall Street Journal wrote last week. T-Mobile ended 2019 with 53,000 employees, while “Sprint last reported 28,500 employees in early 2019,” the Journal article said.