Antitrust Lawyer Blog Commentary on Current Developments

Competitors, Regulators, and Law Enforcement Officials Seek Halt Sale of Verizon’s Puerto Rico Telecom Assets

Also on July 14, several parties asked the FCC to deny license transfers related to the proposed sale of Verizon Communications, Inc.'s (“Verizon”) Puerto Rico telecom assets – including the incumbent local exchange carrier and its second largest wireless service operator – to America Movil S.A. de C.V. (“American Movil”). Competitors are concerned that the new operators will block the development of competition, regulators in Puerto Rico are dubious of the proposed deal's public-interest claims, and law enforcement officials want more time to examine national security and other questions.
The Telecommunications Regulatory Board of Puerto Rico petitioned the FCC to deny the license-transfer petition, under which Verizon would sell its interest in Telecommunicaciones de Puerto Rico, Inc., which is the parent of Puerto Rico Telephone Co. (“PRTC”) and PRT Larga Distancia, Inc., among other subsidiaries. In particular, the board raised concerns about how the transaction would affect service quality and was also unimpressed with pledges to “examine” wireless network upgrades, adding that competition and demand make such a “purported 'benefit' inevitable, no matter who controls PRTC.”

In addition, it dismissed claims of economies of scale that would be created by the transaction, doubting that America Movil would benefit from economies of scale not enjoyed by Verizon. “The application offers a public interest statement that is nothing but meaningless platitudes, devoid of specifics, tangible benefits, and real commitments,” the board said. It also said the transaction would create a “direct adverse effect” by giving America Movil its substantial asset in a U.S. jurisdiction, which would be a “magnet for litigation” and would put the “assets of the Puerto Rico Telephone Company in jeopardy.”

The regulatory board implored the FCC to impose conditions on the transaction if it approves the sale, including a range of service quality requirements and performance measurements. Meanwhile, the U.S. Department of Justice, with the concurrence of the Department of Homeland Security, asked the FCC to defer action on the applications until it can evaluate potential national security, law enforcement, and public safety issues raised by the transaction.

For more information contact:

Olev Jaakson at ojaakson@dbmlawgroup.com.