Press Release

PUC Asks Sprint/Nextel, United Telephone for Commitment Letter on Any Planned Job Cuts Before Separating Wireline Businesses from Newly Merged Company - 1 of 2 PUC Actions Today Dealing with Mergers and Economic Development

Published on 3/16/2006

Filed under: Telecommunications

HARRISBURG -- The Pennsylvania Public Utility Commission (PUC) today voted to seek a commitment letter about whether any job cuts are planned before giving final approval to a settlement to separate the newly merged Sprint/Nextel’s wireline local telephone service business -- United Telephone Company of Pennsylvania (United PA) -- into an independent, standalone company apart from its wireless company.  This is one of two actions the PUC took today related to mergers and economic development.

Today’s action relates to the proposed transfer of United PA and LTD Long Distance (of Delaware, previously created to provide long-distance service to customers, in Sprint’s service territory, including those of United PA) to a new parent company for now known as LTD Holding Company, which will become the largest independent local telephone company in the United States, with 2004 annual revenues exceeding $6 billion.  The new company would operate independently of Sprint and have its own managers and board of directors.

On Nov. 30, 2005, Sprint, the Office of Consumer Advocate, Office of Small Business Advocate and the Commission‘s Office of Trial Staff filed a Joint Petition for Settlement seeking resolution of a number of contested issues related to this “spin-off.”  The parties reached agreement on a multi-year rate freeze, broadband availability, capital structure, dividend issuances, external debt and service-quality reporting.                   

However, Chairman Wendell F. Holland said in a motion approved today that he was concerned about the following stipulation of the Joint Settlement, which states:  “Upon execution of this Settlement, Joint Applicants agree to provide to all parties a letter executed by Michael Fuller, Chief Operating Officer of LTD Holding Company, setting forth LTD Holding Company’s commitment to employ adequate resources and investment to ensure that United PA maintains adequate service quality to its retail customers in Pennsylvania.”

Chairman Holland said, “While the Commission encourages settlements, it is in the public interest that this stipulation is clarified before Commission issues a Final Order approving the Joint Settlement.  Accordingly, I move that the Commission tentatively approve the Joint Settlement with the condition that the referenced commitment letter specifically identify adequate resources as it relates to Pennsylvania workforce numbers.  This commitment letter should specify whether adequate resources would include Pennsylvania job cuts and how adequate resources in Pennsylvania can be maintained with contemplated job cuts.  Such conditions are not the Commission’s attempt to manage a utility, but rather mechanisms of ensuring that the proposed transaction is in the public interest, and that the post-merger activity will be able to furnish and maintain adequate, safe, efficient and reliable service to the public.”

Vice Chairman James H. Cawley said in a statement, “The Joint Petition for Settlement provides a rate freeze for United PA’s residential and business consumers until June 30, 2009.  While I hesitate to jeopardize the Joint Petition for Settlement, I believe that United PA should forthrightly explain its ‘commitment to employ adequate resources and investment to ensure … adequate service quality to its retail customers in Pennsylvania.’” 

Commissioner Terrance J. Fitzpatrick voted no on this matter.

In the event that the Joint Signatories reject the PUC’s conditioned approval of the Joint Settlement within 10 days, the proceeding will be remanded to a PUC Administrative Law Judge for further action as appropriate. 

This action deals with the second stage in a two-stage merger.  In the first stage, Sprint merged Nextel into a subsidiary of Sprint.  In the second stage, Sprint intended to spin off 17 local exchange carriers, including United PA, to Sprint/Nextel shareholders.  Commission approval is necessary for the second stage of this merger, and Sprint applied for Commission approval on Aug. 26, 2005.

The United PA is Sprint’s local wireline telephone company operating in Pennsylvania.  Sprint’s local Pennsylvania operations provide service in all or parts of 25 counties in Central and Western Pennsylvania.  As of June 30, 2005, Sprint served approximately 386,000 access lines in Pennsylvania. 

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition.

For recent news releases, or more information about the PUC, visit our Internet homepage at www.puc.state.pa.us.

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Docket Nos. A-313200F0007, A-311379F0002

Contact:

• Tom Charles
  Director of Communications
  717-787-9504
  thcharles@pa.gov