The way that minorities and women gain first class digital citizenship certainly involves building wealth. The sale or acquisition of telecom assets is a key driving force behind this endeavor. Customer lists, spectrum, and physical entities – such as towers and stores – individually present an opportunity to create a solid business. The ability to successfully operate these entities ultimately determines whether minority entrepreneurs fail or succeed.
Therefore, it’s imperative that minority entrepreneurs – with limited fiscal assets – manage prospective business transactions properly. There is little room for mistake in an industry that allows so few minorities to participate. “There’s nothing more critical that we can do to build an egalitarian society than to democratize ownership of these assets,” said David Honig at MMTC’s 9th Annual Telecom Access to Capital and Telecommunication Policy Conference this summer.
The telecommunications industry is constantly seeing consolidation through acquisitions and other business transactions. If either party in a prospective merger closes a deal without requisite regulatory approval it can be costly. Both parties may subsequently be exposed to long elaborate hearings, fines, penalties and, even worse, disapproval of the prospective transaction.
Negotiating and Documenting the Principal Deal Terms: Due Diligence
A knowledgeable team of lawyers, engineers, and financial advisers are fundamental to helping entrepreneurs – in particular those with limited intangible resources – to navigate the complexities of a merger and acquisition deal, or other business transactions.
“In all the transactions of these sorts, the Devil is really in the detail….You want to really drill down into what you are acquiring, and there are very detailed due diligence lists that can be very deal specific,” said Francisco Montero, one of the conference panelists and partner at the law firm of Fletcher, Herald & Hildreth, P.L.C.
Montero suggests that a “letter of intent” is an effective tool in the due diligence phase of an asset transaction. “The letters of intent will memorialize exactly what the deal terms are going to be,” said Montero. “From a buyer’s perspective it kind of gives you a cushion – a period of time during which you can review and investigate the assets you are buying, the business you are buying, and at the same time hold the seller in place.”
In addition, the due diligence process requires a complete record of the seller’s assets, authorizations, and liabilities. This is essential to guarantee that the business or assets being purchased are fully known to the buyer, saving both time and heartache at closing.
FCC and Department of Justice Considerations in Telecom Transactions
Proposed telecom merger transactions often present minority business owners and entrepreneurs with the opportunity to streamline into the telecom marketplace. This is vital because proposed telecom mergers that promote diversity, in effect, promote competition and contribute to the general public interest of society.
Department of Justice: Consolidation in the Telecommunication Industry
Both the DOJ and FCC have the authority to review the competitive impact of proposed mergers, but both authorities employ different substantive and procedural tactics in their respective merger reviews. The DOJ applies the “substantially lessen competition” standard under section 7 of the Clayton Act, while the FCC applies the “public interest” standard under the Communications Act.
“In effect, what the DOJ is looking at [in such situations] is whether the transaction would cause the resulting firm to acquire market power – the ability to raise prices in the market without losing significant market share,” said Ari Fitzgerald, partner at Hogan Lovells and current MMTC secretary.
In addition to some of the factors that the DOJ reviews, Fitzgerald revealed that the FCC also considers distinct policy issues. “The FCC considers issues, such as whether the deal would enhance localism or diminish localism.…They look at diversity of content issues – when we’re talking about broadcast media deals….They look at viewpoint diversity, and at times they have looked at minority ownership and other policy issues.”
AT&T Addresses Negative Impacts of AT&T Merger
Both proponents and opponents of the proposed AT&T and T-Mobile merger use these review standards as the crux for their respective arguments. Opponents like the DOJ, for example, allege that the prospective merger would hurt job creation, investment, competition, and ultimately consumers. Proponents like MMTC and the NAACP, however, assert that it will enhance diversity within the telecom industry, increase investment, return thousands of outsourced jobs back to our own economy, and expand wireless broadband access to underserved and rural communities – promoting public interest.
Overall, democratizing these processes is essential to the welfare of society. On behalf of minority consumers and entrepreneurs, these merger and business transactions encourage voluntary divestiture commitments by the parties involved. These commitments make it easier to get the deal approved, and enhance the likelihood of minority wealth and ownership in the telecom sector.