Telecommunications 2018: A Year in Review
2018 was a blockbuster year for the telecommunications industry. Sprint and long-time firm client T-Mobile agreed to merge; AT&T closed its deal for the acquisition of Time Warner Inc.; Disney acquired Fox; and Comcast acquired Sky – a transaction with which the firm was indirectly involved. Many of these high-profile transactions were entered into, at least in part, as a means to create better and more efficient platforms for the soon-arriving 5G networks. 5G networks, which are expected to result in incredibly fast speeds and connections, greater capacities for data, and reduced latency, will be yet another large step forward for the telecommunications industry. As such, 5G will likely continue to motivate companies to build the infrastructure – or to seek out transactions that will supplement the infrastructure – necessary to maximize the benefits of the new and improved network.
In a more firm-focused notable telecom-related event, the firm’s very own Barry Adelman was admitted into the Wireless Hall of Fame.
With an eye towards 2019, in which both the integration inherent to the above-mentioned transactions, as well as the era of 5G, will progress onward, we would like to take a moment to provide some color on the highlights of the telecommunication industry’s 2018:
The Sprint – T-Mobile Merger
After a seemingly endless courtship, and the more permissive anti-trust posture of the current administration, T-Mobile and Sprint are finally merging. The future newly-combined “T-Mobile” will be the result of an all-stock transaction and is expected to have an enterprise value approaching $150 billion. The U.S. wireless market will become a “three-carrier” market although innovations in wifi and other emerging technologies will likely offer additional competition to the three incumbents. The combined spectrum assets and network capacity of the new T-Mobile is expected to make it one of the leading platforms for the future 5G network. The companies have heralded this merger as a step towards greater competition in the industry (arguing that individually they would be challenged to finance the 5G build-outs needed to compete with AT&T and Verizon). This is presented as an important moment for the United States to further prove itself in the digital economy and as providing additional alternatives for consumers in a world where streaming services, such as Netflix, are gaining traction. Entering 2019, the companies’ main focus will be on integration of the two big-name entities.
AT&T’s Acquisition of Time Warner
AT&T’s acquisition of Time Warner was completed in June of 2018 through a stock-and-cash transaction valued at approximately $85 billion. Interestingly, this transaction was considered a “vertical” merger, as AT&T, a wireless carrier and broadband provider, and Time Warner, a media and entertainment conglomerate, do not directly compete with one another. This merger is expected to result in synergies of up to $2.5 billion and in improved content and greater alternative options for consumers, according to press releases disseminated by these two companies. In 2019, these two companies will likely be looking to continue effectuating such merger.
Huawei Technologies: A Potential Ban
In the coming year, China’s Huawei Technologies, a multinational telecommunications equipment and consumer electronics company, will be a must-watch competitor in the industry. The telecom giant has recently been under scrutiny from the United States, Australia, France and New Zealand, all of which are concerned that the company and its products are a threat to cyber and national security. The United States is currently considering an executive order that would, by declaring a state of national emergency, allow for a complete ban on the use of telecommunications equipment made by Huawei and another similarly-situated company by companies in the United States. Although this may be a positive development for rival telecom companies vying for a higher percentage of the share of the global telecommunications equipment market (the Wall Street Journal reported that Huawei’s share of such market was as high as 28% during the first three quarters of 2018), Huawei’s 5G technology is reported to be the most advanced among all equipment providers. Accordingly, the world-wide roll-out of 5G networks may be adversely impacted by an inability to use Huawei’s advanced technology.
Friedman Kaplan’s Representation of Trilogy in a Complex Up-C Transaction
Turning to our own telecom work, Friedman Kaplan recently represented our long-time client Trilogy International Partners, Inc., an international telecommunications company led by wireless pioneer John W. Stanton, in its conversion to a public company through a business combination with Alignvest Acquisition Corporation, a Canadian Special Purpose Acquisition Company (SPAC), in an Up-C transaction. Trilogy operates as the majority owner of wireless businesses in New Zealand and Bolivia. The Up-C structure, more typically used in the REIT context, was highly complex and was one of the first SPAC transactions to be consummated in Canada. Trilogy also issued high yield bonds in connection with the merger. We continue to advise Trilogy on a complex array of securities law, financing and other transactional matters.
Friedman Kaplan’s Representation of T-Mobile in Negotiating Two Multi-Year Agreements
In the summer of 2018, we represented T-Mobile in connection with the negotiation and drafting of a multi-year agreement with Nokia for the provision by Nokia to T-Mobile of equipment, software and services for T-Mobile’s build-out of its 5G network in the United States. A few months later, in the fall of 2018, we represented T-Mobile in connection with its multi-year agreement with Ericsson, pursuant to which Ericsson will also provide T-Mobile with equipment, software and services, including the latest 5G New Radio (NR) hardware and software compliant with 3GPP standards. These transactions are valued at approximately $7 billion in the aggregate, demonstrating T-Mobile’s commitment to the deployment of a reliable, nationwide 5G network for its customers.
Friedman Kaplan’s Barry Adelman Inducted into Wireless History Foundation Hall of Fame
On September 12, 2018, our very own Barry Adelman was inducted into the prestigious Wireless Hall of Fame for his incredible work in this area, stretching back to the wireless industry in the 1980s when he oversaw the formation of joint ventures for sixty of the ninety largest cellular markets. Since then, Barry has continued to represent clients in multibillion-dollar wireless and telecommunications-related transactions, as well as to contribute to the wireless industry as a whole through his aid in building and maintaining the framework of, and being a leading force in, such industry.