[Federal Register: August 2, 2005 (Volume 70, Number 147)]
[Notices]
[Page 44357-44376]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au05-56]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. ALLTEL Corporation and Western Wireless
Corporation; Competitive Impact Statement, Proposed Final Judgment,
Complaint, Preservation of Assets Stipulation and Order
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final
Judgment, Preservation of Assets Stipulation and Order, and Competitive
Impact Statement have been filed with the U.S. District Court for the
District of Columbia in United States v. ALLTEL Corporation and Western
Wireless Corporation, Civil Case No. 1:05CV01345. On July 6, 2005, the
United States filed a complaint alleging that the proposed acquisition
of Western Wireless Corporation (``Western Wireless'') by ALLTEL
Corporation (``ALLTEL''), would violate section 7 of the Clayton Act,
15 U.S.C. 18, by substantially lessening competition in the provision
of mobile wireless telecommunications services. The proposed Final
Judgment, filed at the same time as the Complaint, Competitive Impact
Statement, and Preservation of Assets Stipulation and Order, requires
ALLTEL to divest assets in three states--Arkansas, Kansas, and
Nebraska--in order to proceed with ALLTEL's $6 billion stock-and-cash
acquisition of Western Wireless. The Competitive Impact Statement filed
by the United States describes the Complaint, the proposed Final
Judgment, the industry, and the remedies available to private litigants
who may have been injured by the alleged violation.
Copies of the Complaint, proposed Final Judgment, Preservation of
Assets Stipulation and Order, the Competitive Impact Statement, and all
further papers filed with the Court in connection with this Complaint
will be available for inspection at the Antitrust Documents Group,
Antitrust Division, Liberty Place Building, Room 215, 325 7th Street,
NW., Washington, DC 20530 (202-514-2481), and the Office of the Clerk
of the
[[Page 44358]]
U.S. District Court for the District of Columbia. Copies of these
materials may be obtained from the Antitrust Division upon request and
payment of the copying fee set by Department of Justice regulations.
Interested persons may submit comments in writing regarding the
proposed consent decree to the United States. Such comments must be
received by the Antitrust Division within sixty (60) days and will be
filed with the Court by the United States. Comments should be addressed
to Nancy Goodman, Chief, Telecommunications & Media Enforcement
Section, Antitrust Division, U.S. Department of Justice, 1401 H Street,
NW., Suite 8000, Washington, DC 20530 (202-514-5621). At the conclusion
of the sixty (60) day comment period, the U.S. District Court for the
District of Columbia may enter the proposed consent decree upon finding
that it serves the public interest.
J. Robert Kramer II,
Director of Operations.
United States of Amercia, Plaintiff, v. Alltel Corporation and
Western Wireless Corporation, Defendants.
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgement submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
Defendants entered into an Agreement and Plan of Merger dated
January 9, 2005, pursuant to which ALLTEL Corporation (``ALLTEL'') will
acquire Western Wireless Corporation (``Western''). Plaintiff filed a
civil antitrust Complaint on July 6, 2005 seeking to enjoin the
proposed acquisition. The Complaint alleges that the likely effect of
this acquisition would be to lessen competition substantially for
mobile wireless telecommunications services in sixteen (16) geographic
areas in the states of Arkansas, Kansas, and Nebraska in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18. This loss of competition
would result in consumers facing higher prices and lower quality or
quantity of mobile wireless telecommunications services.
At the same time the Complaint was filed, plaintiff also filed a
Preservation of Assets Stipulation and Order and proposed Final
Judgment, which are designed to eliminate the anticompetitive effects
of the acquisition. Under the proposed Final Judgement, which is
explained more fully below, defendants are required to divest Western
Wireless' mobile wireless telecommunications services businesses and
related assets in sixteen (16) markets (``Wireless Business Divestiture
Assets'') and Western Wireless' Cellular One Group Assets which
includes the Cellular One service mark and related assets (``Cellular
One Group Assets'') (collectively the ``Divestiture Assets''). Under
the terms of the Preservation of Assets Stipulation and Order,
defendants will take certain steps to ensure (a) that these assets are
preserved and that the Divestiture Assets are operated as competitively
independent, economically viable and ongoing businesses; (b) that they
will remain independent and uninfluenced by defendants or the
consummation of the transaction; and (c) that competition is maintained
during the pendency of the ordered divestiture.
Plaintiff and defendants have stipulated that the proposed Final
Judgement may be entered after compliance with the APPA. Entry of the
proposed Final Judgment would terminate this action, except that the
Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof. Defendants have also stipulated that they will comply with the
terms of the preservation of Assets Stipulation and Order and the
proposed Final Judgment from the date of signing of the Preservation of
Assets Stipulation and Order, pending entry of the proposed Final
Judgment by the Court and the required divestitures. Should the Court
decline to enter the proposed Final Judgement, defendants have also
committed to continue to abide by its requirements and those of the
Preservation of Assets Stipulation and Order until the expiration of
time for appeal.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
ALLTEL, with headquarters in Little Rock, Arkansas, is a
corporation organized and existing under the laws of the state of
Delaware. ALLTEL is the sixth-largest provider of mobile wireless voice
and data services in the United States by number of subscribers; it
serves approximately 8.8 million customers. It provides mobile wireless
telecommunications services in one hundred fifty-one (151) rural
service areas and in ninety-two (92) metropolitan statistical areas
located within twenty-four (24) states and roaming services in these
areas to other mobile wireless providers who use the CDMA platform.
ALLTEL provides local wireline telephone service to 3 million customers
primarily located in rural areas in fifteen (15) states. In 2004,
ALLTEL earned revenues of approximately $8.2 billion.
Western Wireless, with headquarters in Bellevue, Washington, is a
corporation organized and existing under the laws of the state of
Washington. Western is the ninth-largest provider of mobile wireless
voice and data services in the United States by number of subscribers;
it serves approximately 1.4 million customers. It operates in eighty-
eight (88) rural service areas and nineteen (19) metropolitan
statistical areas located within nineteen (19) western states under the
Cellular One service mark, except in one (1) license area in Texas
where it operates as Western Wireless. Western Wireless also provides
in its service areas roaming services to other providers who use CDMA,
TDMA, and GSM technology. Through its subsidiary, Western Wireless
International, it provides communications services in seven (7)
countries outside of the United States. Western Wireless owns the
Cellular One Group, a general partnership that owns the Cellular One
service mark and licenses use of the mark to other mobile wireless
providers. In 2004, Western Wireless earned approximately $1.9 billion
in revenues.
Pursuant to an Agreement and Plan of Merger dated January 9, 2005,
ALLTEL will acquire Western Wireless in a stock-and-cash transaction
valued at approximately $6 billion. If this transaction is consummated,
ALLTEL and Western Wireless combined would have approximately 10
million subscribers, with $10.1 billion in revenues and operations in
thirty-three (33) states.
The proposed transaction, as initially agreed to by defendants,
would lessen competition substantially for mobile wireless
telecommunications services in sixteen (16) markets. This acquisition
is the subject of the Complaint and proposed Final Judgement filed by
plaintiffs.
B. Mobile Wireless Telecommunications Services Industry
Mobile wireless telecommunications services allow customers to make
and receive telephone calls and use data services using radio
transmissions without being confined to a small area
[[Page 44359]]
during the call or data session, and without the need for unobstructed
line-of-sight to the radio tower. This mobility is highly prized by
customers, as demonstrated by the more than 180 million people in the
United States who own mobile wireless telephones. In 2004, revenues for
the sale of mobile wireless telecommunications services in the United
States were over $100 billion. To provide these services, mobile
wireless telecommunications services providers must acquire adequate
and appropriate spectrum, deploy an extensive network of switches,
radio transmitters, and receivers, and interconnect this network with
those of local and long-distance wireline telecommunications providers
and other mobile wireless telecommunications services providers.
The first wireless voice system were based on analog technology,
now referred to as first-generation or ``IG'' technology. These analog
systems were launched after the FCC issued the first licenses for
mobile wireless telephone service: two cellular licenses (A-block and
B-block) in each geographic area in the early to mid-1980s. The
licenses are in the 800 MHz range of the radio spectrum, each license
consists of 25 MHz of spectrum, and they are issued for each
Metropolitan Statistical Area (``MSA''), and Rural Service Area
(``RSA'') (collectively) ``Cellular Marketing Areas'' or ``CMAs''),
with a total of 734 CMAs covering the entire United States. In 1982,
one of the licenses was issued to the incumbent local exchange carrier
in the market, and the other was issued by lottery to someone other
than the incumbent. Cellular licenses must support analog service until
February 2008.
In 1995, the FCC allocated and subsequently issued licenses for
additional spectrum for the provision of Personal Communications
Services (``PCS''), a category of services that includes mobile
wireless telecommunications services comparable to those offered by
cellular licensees. These licenses are in the 1.8 GHz range of the
radio spectrum and are divided into six blocks: A, B, and C, which
consist of 30 MHz each; and D, E, and F, which consist of 10 MHz each.
Geographically, the A and B-block 30 MHz licenses are issued by Major
Trading Areas (``MTAs''), and C, D, E and F-block licenses are issued
by Basic Trading Areas (``BTAs''), several of which comprise each MTA.
MTAs and BTAs do not generally correspond to MSAs and RSAs. With the
introduction of the PCS licenses, both cellular and PCS licensees began
offering digital services, thereby increasing capacity, shrinking
handsets, and extending battery life. In 1996, one provider, a
specialized mobile radio (``SMR'' or ``dispatch'') spectrum licensee,
began to use its SMR spectrum to offer mobile wireless
telecommunications services comparable to those offered by other mobile
wireless telecommunications services providers, in conjunction with its
dispatch, or ``push-to-talk,'' service.
Today, more than 90 percent of the all mobile wireless
telecommunications services customers have digital service, and nearly
all mobile wireless voice service has migrated to second-generation or
``2G'' digital technologies: TDMA (time division multiple access), GSM
(global standard for mobile, a type of TDMA standard used by all
carriers in Europe), and CDMA (code division multiple access). Mobile
wireless telecommunications services providers have chosen to build
their networks on these incompatible technologies and most have chosen
CDMA or GSM, with TDMA having been orphaned by equipment vendors. (The
SMR providers use a fourth incompatible technological standard better
suited to the spectrum they own, and, as SMR licensees, they have no
obligation to support a specific technology standard.) Even more
advanced technologies (``3G'') have begun to be deployed for voice and
data. In all of the geographic areas alleged in the complaint, ALLTEL
and Western Wireless own 25 MHz cellular licenses. Western also owns
some additional PCS licenses. Cellular spectrum because of its
propagation characteristics is more efficient to use in serving rural
areas.
C. The Competitive Effects of the Transaction on Mobile Wireless
Telecommunications Services
ALLTEL's proposed acquisition of Western Wireless will
substantially lessen competition in mobile wireless telecommunications
services in the sixteen (16) relevant geographic areas. Mobile wireless
telecommunications services include both voice and data services
provided over a radio network and allow customers to maintain their
telephone calls or data sessions without wires, such as when traveling.
Fixed wireless services and other wireless services that have a limited
range (e.g., Wi-Fi) do not offer a viable alternative to mobile
wireless telecommunications services primarily because customers using
these services cannot maintain a call or data session while moving from
one location to another.
Most customers use mobile wireless telecommunications services in
close proximity to their workplaces and homes. Thus, customers
purchasing mobile wireless telecommunications services choose among
mobile wireless telecommunications services providers that offer
services where they are located and travel on a regular basis: Home,
work, other areas they commonly visit, and areas in between. The number
and identity of mobile wireless telecommunications services providers
varies from geographic area to geographic area, along with the quality
of their services and the breadth of their geographic coverage, all of
which are significant factors in customers' purchasing decisions.
Mobile wireless telecommunications services providers can and do offer
different promotions, discounts, calling plans, and equipment subsidies
in different geographic areas, effectively varying the actual price for
customers by geographic area.
The relevant geographic markets for mobile wireless
telecommunications services are, therefore, local in nature. The FCC
has licensed a limited number of mobile wireless telecommunications
services providers in these and other geographic areas based upon the
availability of radio spectrum. These FCC spectrum licensing areas
often represent the core of the business and social sphere where
customers face the same competitive choices for mobile wireless
telecommunications services. Although not all FCC spectrum licensing
areas are relevant geographic areas for the purpose of analyzing the
antitrust impact of this transaction, the FCC spectrum licensing areas
that encompass the sixteen (16) geographic areas of concern in this
transaction are where consumers in these communities principally use
their mobile wireless telecommunications services. As described in the
Complaint, the relevant geographic markets where the transaction will
substantially lessen competition for mobile wireless telecommunications
services are represented by the following FCC spectrum licensing areas
which are all Rural Service Areas (``RSAs''): Arkansas RSA-11 (CMA
334), Kansas RSA-3 (CMA 430), Kansas RSA-4 (CMA 431), Kansas RSA-8 (CMA
435), Kansas RSA-9 (CMA 436), Kansas RSA-10 (CMA 437), Kansas RSA-14
(CMA 441), Nebraska RSA-2 (CMA 534), Nebraska RSA-3 (CMA 535), Nebraska
RSA-4 (CMA 536), Nebraska RSA-5 (CMA 537), Nebraska RSA-6 (CMA 538),
Nebraska RSA-7 (CMA 539), Nebraska RSA-8 (CMA 540), Nebraska RSA-9 (CMA
541), and Nebraska RSA-10 (CMA 542).
The sixteen (16) geographic markets of concern for mobile wireless
telecommunications services were identified by a fact-specific, market-
by-
[[Page 44360]]
market analysis that included consideration of, but was not limited to,
the following factors: The number of mobile wireless telecommunications
service providers and their competitive strength and weaknesses;
ALLTEL's and Western Wireless' market shares along with those of the
other providers; whether additional spectrum is or is likely to be
available; whether any providers are limited by insufficient spectrum
or other factors in their ability to add new customers; the
concentration of the market, and the breadth and depth of coverage by
different providers in each market; and the likelihood that any
provider would expand its existing coverage.
ALLTEL and Western Wireless both own businesses that offer mobile
wireless telecommunications services in the sixteen (16) relevant
geographic areas. The companies' combined market shares for mobile
wireless telecommunications services in the relevant markets as
measured in terms of subscribers range from over 50 to nearly 100
percent. In each relevant geographic market, ALLTEL has the largest
market share, and, in all but four RSAs, Western Wireless is the
second-largest mobile wireless telecommunications services provider. In
all of the relevant geographic markets, ALLTEL and Western Wireless own
the only 800 MHz band cellular spectrum licenses which are more
efficient in serving rural areas than 1900 MHz band PCS spectrum. As a
result of holding the cellular spectrum licenses and being early
entrants into these markets, ALLTEL's and Western Wireless' networks
provide greater depth and breadth of coverage than their competitors,
which are operating on PCS spectrum in the relevant geographic markets,
and thus are more attractive to consumers.
In addition, mobile wireless telecommunications services providers
with partial coverage in a geographic area do not aggressively market
their services in this location because potential customers would use
their wireless telephones primarily in places where these providers
have no network. In theory, these less built-out providers could
service residents of these rural areas through roaming agreements, but
as a practical matter when service is provided on another carrier's
network, the providers would have to pay roaming charges to, and rely
on, that carrier to maintain the quality of the network. Because of
these constraints, the other providers who own partially built-out
networks in the sixteen (16) geographic areas are reluctant to market
their services to rural residents of these areas. Therefore, ALLTEL and
Western Wireless are likely closer substitutes for each other than the
other mobile wireless telecommunications services providers in the
relevant geographic markets. Additionally, post-merger in these
markets, there will be insufficient remaining competitors, with the
type of coverage desired by customers, and the ability to compete
effectively to defeat a small, but significant price increase by the
merged firm.
The relevant geographic markets for mobile wireless
telecommunications services are highly concentrated. As measured by the
Herfindahl-Hirschman Index (``HHI''), which is commonly employed in
merger analysis and is defined and explained in Appendix A to the
Complaint, concentration in these markets ranges from over 2100 to more
than 8500, which is well above the 1800 threshold at which the
Department considers a market to be highly concentrated. After ALLTEL's
proposed acquisition of Western Wireless is consummated, the HHIs in
the relevant geographic markets will range from over 3400 to almost
9700, with increases in the HHI as a result of the merger ranging from
over 1100 to over 4600.
Competition between ALLTEL and Western Wireless in the relevant
geographic markets has resulted in lower prices and higher quality in
mobile wireless telecommunications services than would otherwise have
existed in these geographic markets. If ALLTEL's proposed acquisition
of Western Wireless is consummated, the competition between ALLTEL and
Western Wireless in mobile wireless telecommunications service will be
eliminated in these markets and the relevant geographic markets for
mobile wireless telecommunications services will become substantially
more concentrated. As a result, the loss of competition between ALLTEL
and Western Wireless increases the likelihood of unilateral actions by
the merged firm in the relevant geographic markets to increase prices,
diminish the quality or quantity of services provided, and refrain from
or delay making investments in network improvements.
Entry by a new mobile wireless telecommunications services provider
in the relevant geographic markets would be difficult, time-consuming,
and expensive, requiring the acquisition of spectrum licenses and the
build-out of a network. Expansion by providers who hold spectrum in
these areas and are only partially built-out is also unlikely as the
relevant geographic markets are rural service areas where the combined
firm would own all of the available 800 MHz spectrum. Due to
propagation characteristics of 800 MHz cellular spectrum and 1900 MHz
PCS spectrum, the 800 MHz signals can cover a substantially broader
area than the 1900 MHz signals. The estimated coverage advantage of the
800 MHz spectrum in rural areas ranges from two to as much as five
times greater than PCS. In rural markets, this difference results in
higher build-out costs for PCs networks than for cellular networks. The
high costs of constructing PCS networks in rural markets combined with
the relatively low population density makes it less likely that
carriers that own PCS spectrum would build out in the relevant
geographic markets. Therefore, new entry in response to a small but
significant price increase for mobile wireless telecommunications
services by the merged firm in the relevant geographic markets would
not be timely, likely, or sufficient to thwart the competitive harm
that would result from ALLTEL's proposed acquisition of Western
Wireless.
For these reasons, plaintiff concluded that ALLTEL's proposed
acquisition of Western Wireless will likely substantially lessen
competition, in violation of Section 7 of the Clayton Act, in the
provision of mobile wireless telecommunications services in the
relevant geographic markets.
III. Explanation of the Proposed Final Judgment
The divestiture requirements of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition of mobile
wireless telecommunications services in the sixteen (16) geographic
markets of concern. The proposed Final Judgment requires defendants,
within one hundred twenty (120) days after the filing of the Complaint,
or five (5) days after notice of the entry of the Final Judgment by the
Court, whichever is later, to divest the Wireless Business Divestiture
Assets and the Cellular One Group Assets. The Wireless Business
Divestiture Assets are essentially Western's entire mobile wireless
telecommunications services business in the sixteen (16) markets where
ALLTEL and Western Wireless are each other's closest competitors for
mobile wireless telecommunications services. These assets must be
divested in such a way as to satisfy plaintiff in its sole discretion
that they will be operated by the purchaser as a viable, ongoing,
business that can compete effectively in the relevant market.
Defendants must take all reasonable steps necessary to accomplish the
divestitures quickly and shall cooperate with prospective purchasers.
[[Page 44361]]
With respect to the Wireless Business Divestiture Assets, in some
markets the merged firm may retain Western's PCS wireless spectrum.
Western's PCS spectrum is used primarily to provide roaming services to
other providers who use GSM technology. ALLTEL does not currently
provide GSM roaming and therefore the proposed acquisition will not
lessen competition in providing these services. In requiring
divestitures, plaintiff seeks to make certain that the potential buyer
acquires all the assets it may need to be a viable competitor and
replace the competition lost by the merger. The 25 MHz of cellular
spectrum that must be divested will support the operation and expansion
of the mobile wireless telecommunications services businesses being
divested, allowing the buyer to be a viable competitor to the merged
entity.
The Final Judgment requires that the Wireless Business Divestiture
Assets in the Nebraska RSAs be divested to a single acquirer who, as a
result, will be able to supply service to customers that require
wireless telecommunications service throughout eastern and central
rural Nebraska in the same way that Western Wireless is currently able
to provide that service. This provision resolves concerns about the
loss of competition for customers that demand coverage over a
combination of Nebraska FCC licensing areas, in addition to the
concerns due to eliminating competition within each licensing area.
The Cellular One Group Assets consist of all right, title and
interest in trademarks, trade names, service marks, service names, and
designs for the Cellular One mark. Western Wireless owns the Cellular
One Group Assets and under the terms of the Cellular One licensing
agreements it has entered with other mobile wireless telecommunications
services providers, it is required to promote and maintain the value of
the mark. Western Wireless markets its mobile wireless
telecommunications services under the Cellular One mark in the sixteen
(16) geographic markets of concern in the Complaint. As a result of the
proposed transaction, ALLTEL would have acquired the Cellular One Group
Assets. ALLTEL has no need to use the Cellular One mark in the United
States as it has its own established name. The buyer of the Wireless
Business Divestiture Assets, on the other hand, may need to use the
Cellular One Group name, short term or long term, in order to provide
continuity for existing customers or attract new business.
When agreeing to divestitures to remedy the loss of competition as
a result of a merger, the plaintiff seeks to make certain that the
potential buyer acquires or has accesses to all assets that it may need
to be a viable and substantial competitor. Having an established name
is an important asset that can impact the ability of the buyer to
quickly come into a market and attract customers. In order to ensure
that the buyer has unimpaired access to the Cellular One mark and that
the mark is in the hands of an owner who will aggressively act to
promote and preserve it, the proposed Final Judgment requires ALLTEL to
divest the Cellular One Group Assets. Under the terms of the proposed
Final Judgment, defendants will sell these assets to an appropriate
purchaser who has the intent and capability to maintain the value of
the Cellular One service mark.
A. Timing of Divestitures
In antitrust cases involving mergers or joint ventures in which
plaintiff seeks a divestiture remedy, it requires completion of the
divestitures within the shortest time period reasonable under the
circumstances. The proposed Final Judgment in this case requires, in
Section IV.A, divestiture of the Divestiture Assets, within one hundred
twenty (120) days after the filing of the Complaint, or five (5) days
after notice of the entry of the Final Judgment by the Court, whichever
is later. Plaintiff in its sole discretion may extend the date for
divestiture of the Divestiture Assets by up to sixty (60) days. Because
the FCC's approval is required for the transfer of the wireless
licenses to a purchaser, Section IV.A provides that if applications for
transfer of a wireless license have been filed with the FCC, but the
FCC has not acted dispostively before the end of the required
divestiture period, the period for divestiture of those assets shall be
extended until five (5) days after the FCC has acted. This extension is
to be applied only to the individual Divestitures Assets affected by
the delay in approval of the license transfer and does not entitle
defendants to delay the divestiture of any other Divestiture Assets for
which license transfer approval has been granted.
The divestiture timing provisions of the proposed Final Judgment
will ensure that the divestitures are carried out in a timely manner,
and at the same time will permit defendants an adequate opportunity to
accomplish the divestitures through a fair and orderly process. Even if
all Divestiture Assets have not been divested upon consummation of the
transaction, there should be no adverse impact on competition given the
limited duration of the period of common ownership and the detailed
requirements of the Preservation of Assets Stipulation and Order.
B. Use of a Management Trustee
The Preservation of Assets Stipulation and Order, filed
simultaneously with this Competitive Impact Statement, ensures that,
prior to divestiture, the Divestiture Assets are maintained, the
Wireless Business Divestiture Assets remain an ongoing business
concern, and the Cellular One Group Divestiture Assets remain
economically viable. The Divestiture Assets will remain preserved,
indepdent and uninfluenced by defendants, so that competition is
maintained during the pendency of the ordered divestiture.
The Preservation Assets Stipulation and Order appoints a management
trustee selected by plaintiff to oversee the Divestiture Assets in the
relevant geographic markets. The appointment of a management trustee in
this unique situation is required because the Wireless Business
Divestiture Assets are not independent facilities that can be held
separate and operated as standalone units by the merged firm. Rather,
the Wireless Business Divestiture Assets are an integral part of a
larger network, and to maintain their competitive viability and
economic value, they should remain part of that network during the
divestiture period. To insure that these assets are preserved and
supported by defendants during this period, yet run independently, a
management trustee is necessary to oversee the continuing relationship
between defendants and these assets. The management trustee will also
preserve and ensure the viability of the Cellular One Group Assets. The
management trustee will have the power to operate the Divestiture
Assets in the ordinary course of business, so that they will remain
preserved, independent, and uninfluenced by defendants, and so that the
Wireless Business Divestiture Assets remain an ongoing and economically
viable competitor to defendants and to other mobile wireless
telecommunications services providers. The management trustee will
preserve the confidentiality of competitively sensitive marketing,
pricing, and sales information; insure defendants' compliance with the
Preservation of Assets Stipulation and Order and the proposed Final
Judgment; and maximize the value of the Divestiture Assets so as to
permit expeditious divestiture in a manner consistent with the proposed
Final Judgment.
The Preservation of Assets Stipulation and Order provides that
defendants will
[[Page 44362]]
pay all costs and expenses of the management trustee, including the
cost of consultants, accountants, attorneys, and other representatives
and assistants hired by the management trustee as are reasonably
necessary to carry out his or her duties and responsibilities. After
his or her appointment becomes effective, the management trustee will
file monthly reports with plaintiffs setting forth the efforts to
accomplish the goals of the Preservation of Assets Stipulation and
Order and the proposed Final Judgment and the extent to which
defendants are fulfilling their responsibilities. Finally, the
management trustee may become the divestiture trustee, pursuant to the
provisions of Section V of the proposal Final Judgment.
C. Use of a Divestiture Trustee
In the event that defendants do not accomplish the divestiture
within the periods prescribed in the proposed Final Judgment, the Final
Judgment provides that the Court will appoint a trustee selected by
plaintiff to effect the divestitures. As part of this divestiture,
defendants must relinquish any direct or indirect financial ownership
interests and any direct or indirect role in management or
participation in control. Pursuant to Section V of the proposed Final
Judgment, the divestiture trustee will own and control of Divestiture
Assets until they are sold a final purchaser, subject to safeguards to
prevent defendants from influencing their operation.
Section V details the requirements for the establishment of the
divestiture trust, the selection and compensation of the divestiture
trustee, the responsibilities of the divestiture trustee in connection
with the divestiture and operation of the Divestiture Assets, and the
termination of the divestiture trust. The divestiture trustee will have
the obligation and the sole responsibility, under Section V.D, for the
divestiture of any transferred Divestiture Assets. The divestiture
trustee has the authority to accomplished divestitures at the earliest
possible time and ``at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee.'' In
addition, to insure that the divestiture trustee can promptly locate
and divest to an acceptable purchaser, plaintiff, in its sole
discretion, may require defendants to include additional assets, or
allow defendants to substitute substantially similar assets, which
substantially relate to the Divestiture Assets to be divested by the
divestiture trustee.
The divestiture trustee will not only have responsibility for sale
of the Divestiture Assets, but will also be the authorized holder of
the wireless licenses, with full responsibility for the operations,
marketing, and sales of the wireless businesses to be divested, and
will not be subject to any control or direction by defendants.
Defendants will no longer have any role in the ownership, operation, or
management of the Divestiture Assets following consummation of the
transaction, as provided by Section V, other than the right to receive
the proceeds of the sale, and certain obligations to provide support to
the Divestiture Assets, and cooperate with the divestiture trustee in
order to complete the divestiture, as indicated in Section V.L and in
the Preservation of Assets Stipulation and Order.
The proposed Final Judgment provides that defendants will pay all
costs and expenses of the divestiture trustee. The divestiture
trustee's commission will be structured, under Section V.G of the
proposed Final Judgment, so as to provide an incentive for the
divestiture trustee based on the price obtained and the speed with
which the divestitures are accomplished. After his or her appointment
becomes effective, the divestiture trustee will file monthly reports
with the Court and plaintiff setting forth his or her efforts to
accomplish the divestitures. Section V.J requires the divestiture
trustee to divest the Divestiture Assets to an acceptable purchaser or
purchasers no later than six (6) months after the assets are
transferred to the divestiture trustee. At the end of six (6) months,
if all divestitures have not been accomplished, the trustee and
plaintiff will make recommendations to the Court, which shall enter
such orders as appropriate in order to carry out the purpose of the
trust, including extending the trust or term of the trustee's
appointment.
The divestiture provisions of the proposed Final Judgment will
eliminate the anticompetitive effects of the transaction in the
provision of mobile wireless telecommunications services. The
divestitures of the Divestiture Assets will preserve competition in
mobile wireless telecommunications services by maintaining an
independent and economically viable competitor in the relevant
geographic markets.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
Plaintiff and defendants have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that plaintiff has not withdrawn its
consent. The APPA conditions entry upon the Court's determination that
the proposed Final Judgment is in the public interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to plaintiff written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within
sixty (60) days of the date of publication of this Competitive Impact
Statement in the Federal Register. All comments received during this
period will be considered by the Department of Justice, which remains
free to withdraw its consent to the proposed Final Judgment at any time
prior to the Court's entry of judgment. The comments and the response
of plaintiff will be filed with the Court and published in the Federal
Register.
Written comments should be submitted to: Nancy M. Goodman, Chief,
Telecommunications and Media Enforcement Section, Antitrust Division,
U.S. Department of Justice, 1401 H Street, NW., Suite 8000, Washington,
DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
Plaintiff considered, as an alternative to the proposed Final
Judgment, a full trial on the merits against defendants. Plaintiff
could have continued the litigation and sought preliminary and
permanent injunctions against ALLTEL's acquisition of Western Wireless.
Plaintiff is satisfied, however,
[[Page 44363]]
that the divestiture of assets and other relief described in the
proposed Final Judgment will preserve competition for the provision of
mobile wireless telecommunications services in the relevant markets
identified in the Complaint.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the Court shall determine whether entry of
the proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e)(1). In making that determination, the Court shall consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16 (e)(1)(A) & (B). As the United States Court of Appeals for
the District of Columbia Circuit has held, the APPA permits a court to
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the consent judgment is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the consent judgment
may positively harm third parties. See United States v. Microsoft
Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
``Nothing in this section shall be construed to require the court
to conduct an evidentiary hearing or to require the court to permit
anyone to intervene.'' 15 U.S.C. 16(e)(2). Thus, in conducting this
inquiry, ``[t]he court is nowhere compelled to go to trial or to engage
in extended proceedings which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator
Tunney).\1\ Rather:
\1\ See United States v. Gillette Co., 204 F. Supp. 713, 716 (D.
Mass. 1975) (recognizing it was not the court's duty to settle;
rather, the court must only answer ``whether the settlement achieved
[was] within the reaches of the public interest''). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed by the
Department of Justice pursuant to the APPA. Although the APPA
authorizes the use of additional procedures, 15 U.S.C. 16(f), those
procedures are discretionary. A court need not invoke any of them
unless it believes that the comments have raised significant issues
and that further proceedings would aid the court in resolving those
issues. See H.R. Rep. No. 93-1463, 93d Cong., 2d Sess. 8-9 (1974),
reprinted in 1974 U.S.C.C.A.N. 6535, 6538-39.
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
---------------------------------------------------------------------------
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH)
]61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\
\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); Gillette, 406 F. Supp. at 716
(noting that, in this way, the court is constrained to ``look at the
overall picture not hypercritically, nor with a microscope, but with
an artist's reducing glass''); see generally Microsoft, 56 F.3d at
1461 (discussing whether ``the remedies [obtained in the decree are]
so inconsonant with the allegations charged as to fall outside of
the `reaches of the public interest' '').
---------------------------------------------------------------------------
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' United
States v. AT&T Corp., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations
omitted) (quoting Gillette, 406 F. Supp. at 716), aff'd sub nom.
Maryland v. United States, 460 U.S. 1001 (1983); see also United States
v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985)
(approving the consent judgment even though the court would have
imposed a greater remedy).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by plaintiff United States in
formulating the proposed Final Judgment.
Dated: July 6, 2005.
Respectfully submitted,
Deborah A. Roy (D.C. Bar 452573),
Laura R. Starling,
Hillary B. Burchuk (D.C. Bar 366755),
Matthew C. Hammond,
Attorneys, Telecommunications & Media Enforcement Section, Antitrust
Division.
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Suite 8000, Washington, DC 20530, (202) 514-5621, Facsimile:
(202) 514-6381.
United States of America, Plaintiff, v. ALLTEL Corporation and
Western Wireless Corporation, Defendants.
Final Judgment
Whereas, plaintiff, United States of America, filed its Complaint
on July 6, 2005, plaintiff and defendants, ALLTEL Corporation
(``ALLTEL'') and Western Wireless Corporation (``Western Wireless''),
by their respective attorneys, have consented to the entry of this
Final
[[Page 44364]]
Judgment without trial or adjudication of any issue of fact or law, and
without this Final Judgment constituting any evidence against or
admission by any party regarding any issue of fact or law;
And whereas, defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by defendants to assure
that competition is not substantially lessened;
And whereas, plaintiff requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, defendants have represented to plaintiff that the
divestitures required below can and will be made and that defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, 15 U.S.C. 18.
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' or ``Acquirers'' means the entity or entities to
whom defendants divest the Divestiture Assets.
B. ``ALLTEL'' means defendant ALLTEL Corporation, a Delaware
corporation with headquarters in Little Rock, Arkansas, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Cellular One Group'' means the Delaware general partnership,
with headquarters in Bellevue, Washington, engaged in the business of
licensing and promoting the Cellular One service mark and certain
related trademarks, service marks, and designs.
D. ``Cellular One Group Assets'' means all legal and economic
interests Western Wireless holds in the Cellular One Group. Cellular
One Group Assets shall include all right, title and interest in
trademarks, trade names, service marks, service names, designs, and
intellectual property, all license agreements for use of the Cellular
One mark, technical information, computer software and related
documentation, and all records relating to the divestiture assets. If
the acquirer of the Cellular One Group Assets is not the acquirer of
the Wireless Business Divestiture Assets, defendants will grant the
acquirer of the wireless business assets a license to use the Cellular
One service marks on terms generally available at the time the merger
agreement was entered and make the transfer of the Cellular One Group
Assets subject to continuation of these licenses.
E. ``CMA'' means cellular market area which is used by the Federal
Communications Commission (``FCC'') to define cellular license areas
and which consists of Metropolitan Statistical Areas (``MSAs'') and
Rural Service Areas (``RSAs'').
F. ``Divestiture Assets'' means the Wireless Business Divestiture
Assets and the Cellular One Group Assets.
G. ``GSM'' means global system for mobile communications which is
one of the standards used for the infrastructure of digital cellular
service.
H. ``Multi-line Business Customer'' means a corporate or business
customer that contracts with Western Wireless for mobile wireless
services to provide multiple telephones to its employees or members
whose services are provided pursuant to a contract with the corporate
or business customer.
I. ``Transaction'' means the Agreement and Plan of Merger between
ALLTEL and Western Wireless, dated January 9, 2005.
J. ``Western Wireless'' means defendant Western Wireless
Corporation, incorporated in the state of Washington with headquarters
in Bellevue, Washington, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships and joint
ventures, and their directors, officers, managers, agents, and
employees.
K. ``Wireless Business Divestiture Assets'' means, for each mobile
wireless telecommunications services business to be divested under this
Final Judgment, all types of assets, tangible and intangible, used by
defendants in the operation of the mobile wireless telecommunications
services businesses to be divested. ``Wireless Business Divestiture
Assets'' shall be construed broadly to accomplish the complete
divestitures of the entire business of Western Wireless in each of the
following RSA license areas as required by the Final Judgment and to
ensure that the divested mobile wireless telecommunications services
businesses remain viable, ongoing businesses:
(a) Arkansas RSA-11 (CMA 334);
(b) Kansas RSA-3 (CMA 430);
(c) Kansas RSA-4 (CMA 431);
(d) Kansas RSA-8 (CMA 435);
(e) Kansas RSA-9 (CMA 436);
(f) Kansas RSA-10 (CMA 437);
(g) Kansas RSA-14 (CMA 441);
(h) Nebraska RSA-2 (CMA 534);
(i) Nebraska RSA-3 (CMA 535);
(j) Nebraska RSA-4 (CMA 536);
(k) Nebraska RSA-5 (CMA 537);
(l) Nebraska RSA-6 (CMA 538);
(m) Nebraska RSA-7 (CMA 539);
(n) Nebraska RSA-8 (CMA 540);
(o) Nebraska RSA-9 (CMA 541); and
(p) Nebraska RSA-10 (CMA 542);
provided that ALLTEL may retain all of the PCS spectrum currently held
by Western Wireless in each of these RSAs and provided that ALLTEL need
not divest the assets used solely to operate Western Wireless' GSM
roaming business, including GSM roaming contracts and equipment.
Wireless Business Divestiture Assets shall include, without
limitation, all types of real and personal property, monies and
financial instruments, equipment, inventory, office furniture, fixed
assets and furnishings, supplies and materials, contracts, agreements,
leases, commitments, spectrum licenses issued by the FCC and all other
licenses, permits and authorizations, operational support systems, cell
sites, network infrastructure, switches, customer support and billing
systems, interfaces with other service providers, business and customer
records and information, customer contracts, customer lists, credit
records, accounts, and historic and current business plans which relate
primarily to the wireless business being divested, as well as any
patents, licenses, sub-licenses, trade secrets, know-how, drawings,
blueprints, designs, technical and quality specifications and
protocols, quality assurance and control procedures, manuals and other
technical information defendants supply to their own employees,
customers, suppliers, agents, or licensees, and trademarks, trade names
and service marks or other intellectual property, including all
intellectual property rights under third-party licenses that are
capable of being transferred to an Acquirer either in their entirety,
for assets described in (1) below, or through a license obtained
through or from Western Wireless, for assets described in (2) below;
provided that defendants shall only be required to divert Multi-line
Business Customer contracts, if the primary business address for that
customer is located within any of the sixteen (16) license areas
described herein, and further, any
[[Page 44365]]
subscribers who obtain mobile wireless telecommunications services
through any such contract retained by defendants and who are located
within the sixteen (16) geographic areas identified above, shall be
given the option to terminate their relationship with defendants,
without financial cost, within one year of the closing of the
Transaction. Defendants shall provide written notice to these
subscribers within forty-five (45) days after the closing of the
Transaction of the option to terminate.
These divestitures of the Wireless Business Divestiture Assets
shall be accomplished by:
(1) Transferring to the Acquirers the complete ownership and/or
other rights to the assets (other than those assets used substantially
in the operations of Western Wireless' overall wireless
telecommunications services business which must be retained to continue
the existing operations of the wireless properties that defendants are
not required to divest, and that either are not capable of being
divided between the divested wireless telecommunications services
businesses and those not divested, or are assets that the defendants
and the Acquirer(s) agree, subject to approval of plaintiff, shall not
be divided); and
(2) Granting to the Acquirer(s) an option to obtain a non-
exclusive, transferable license from defendants for a reasonable
period, subject to approval of plaintiff, at the election of an
Acquirer to use any of Western Wireless's retained assets under
paragraph (1) above, used in the operation of the wireless
telecommunications services business being divested, so as to enable
the Acquirer to continue to operate the divested wireless
telecommunications services business without impairment. Defendants
shall identify in a schedule submitted to plaintiff and filed with the
Court, as expeditiously as possible following the filing of the
Complaint and in any event prior to any divestitures and before the
approval by the Court of this Final Judgment, any intellectual property
rights under third-party licenses that are used by the wireless
telecommunications services businesses being divested but that
defendants could not transfer to an Acquirer entirely or by license
without third-party consent, and the specific reasons why such consent
is necessary and how such consent would be contained for each asset.
III. Applicability
A. This Final Judgment applies to defendants ALLTEL and Western
Wireless, as defined above, and all other persons in active concert or
participation with any of them who receive actual notice of this Final
Judgment by personal service or otherwise.
B. Defendants shall require, as a condition of the sale or other
disposition of all or substantially all of their assets or of lesser
business units that include the Divestiture Assets, that the purchaser
agrees to be bound by the provisions of this Final Judgment, provided
that defendants need not obtain such an agreement from the Acquirer(s).
IV. Divestitures
A. Defendants are ordered and directed, within one hundred twenty
(120) days after consummation of the Transaction, or five (5) days
after notice of entry of this Final Judgment, whichever is later, to
divest the Divestiture Assets to an acquirer or Acquirers acceptable to
plaintiff in its sole discretion, and, if applicable, to a Divestiture
Trustee designated pursuant to Section V of this Final Judgment.
Plaintiff, in its sole discretion, may agree to one or more extensions
of this time period not to exceed sixty (60) days in total, and shall
notify the court in such circumstances. With respect to divestiture of
the Wireless Business Divestiture Assets by defendants or the
Divestiture Trustee, if applications have been filed with the FCC
within the period permitted for divestiture seeking approval to assign
or transfer licenses to the Acquirer(s) of the Wireless Business
Divestiture Assets, but an order or other dispositive action by the FCC
on such applications has not been issued before the end of the period
permitted for divestiture, the period shall be extended with respect to
divestiture of those Divestiture Assets for which FCC approval has not
been issued until five (5) days after such approval is received.
Defendants agree to use their best efforts to accomplish the
divestitures set forth in this Final Judgment and to seek all necessary
regulatory approvals as expeditiously as possible. This Final Judgment
does not limit the FCC;s exercise of its regulatory powers and process
with respect to the Divestiture Assets. Authorization by the FCC to
conduct the divestiture of a Divestiture Asset in a particular manner
will not modify any of the requirements of this decree.
B. In accomplishing the divestitures ordered by this Final
Judgment, defendants shall promptly make known, if they have not
already done so, by usual and customary means, the availability of the
Divestiture Assets. Defendants shall inform any person making inquiry
regarding a possible purchase of the Divestiture Assets that they are
being divested pursuant to this Final Judgment and provide that person
with a copy of this Final Judgment. Defendants shall offer to furnish
to all prospective Acquireres, subject to customary confidentiality
assurances, all information and documents relating to the Divestiture
Assets customarily provided in a due diligence process except such
information or documents subject to the attorney-client or work product
privileges. Defendants shall make available such information to
plaintiff at the same time that such information is made available to
any other person.
C. Defendants shall provide to the Acquirer(s) and plaintiff
information relating to the personnel involved in the operation,
development, and sale or license of the Divestiture Assets to enable
the Acquirer(s) to make offers of employment. Defendants will not
interfere with any negotiations by the Acquirer(s) to employ any
defendant employee whose primary responsibility is the operation,
development, or sale or license of the Divestiture Assets.
D. Defendants shall permit prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel and to make inspections
of the Divestiture Assets; access to any and all environmental, zoning,
and other permit documents and information; and access to any and all
financial, operational, and other documents and information customarily
provided as part of a due diligence process.
E. Defendants shall warrant to all Acquirer(s) that (1) the
Wireless Business Divestiture Assets will be operational on the date of
sale; (2) every wireless spectrum license is in full force and effect
on the date of sale; and (3) the Cellular One Group Assets will be
unencumbered and not judged invalid or unenforceable by any court or
similar authority on the date of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, licensing, operation, or divestiture of the Divestiture
Assets.
G. Defendants shall warrant to the Acquirer(s) of the Divestiture
Assets that there are no defects in the environmental, zoning,
licensing or other permits pertaining to the operation of each asset
that will have a material adverse effect on the operator of the mobile
wireless telecommunications services business in which the asset is
primarily used, and that following the sale of the Divested Assets,
defendant will not undertake, directly or indirectly, any
[[Page 44366]]
challenges to the environmental, zoning, licensing or other permits
relating to the operation of the Divestiture Assets.
H. Unless plaintiff otherwise consents in writing, the divestitures
pursuant to Section IV, or by a Divestiture Trustee appointed pursuant
to Seciton V of this Final Judgment, shall include the entire
Divestiture Assets and with respect to the Wireless Business
Divestiture Assets, shall be accomplished in such a way as to satisfy
plaintiff, in its sole discretion, that these assets can and will be
used by the acquirer(s) as part of a viable, ongoing business engaged
in the provision of mobile wireless telecommunications services. With
the exception of the Wireless Business Divestiture assets in the
Nebraska RSAs, all of which must be divested to a single Acquirer, the
divestiture of the Divestiture Assets may be made to one or more
Acquirers, provided that in each instance it is demonstrated to the
sole satisfaction of plaintiff that the Divestiture Assets will remain
viable and the divestiture of such assets will remedy the competitive
harm alleged in the Complaint. The divestitures of the Divestiture
Assets, whether pursuant to Section IV or Section V of this Final
Judgment,
(1) Shall be made to an Acquirer (or Acquirers) that, in
plaintiff's sole judgment,
(a) With respect to the Wireless Business Divestiture Assets, has
the intent and capability (including the necessary managerial,
operational, technical, and financial capability) of competing
effectively in the provision of mobile wireless telecommunications
services; and
(b) With respect to the Cellular One Group Assets, has the intent
and capability (including the necessary managerial, operational,
technical, and financial capability) of maintaining and promoting the
intellectual property including trademarks and service marks.
(2) Shall be accomplished so as to satisfy plaintiff in its sole
discretion, that none of the terms of any agreement between the
Acquirer (0r Acquirers) and any defendant shall give defendants the
ability unreasonably to raise the Acquirer's costs, to lower the
Acquirer's efficiency, or otherwise interfere with the ability of the
Acquirer to compete effectively.
I. At the option of the Acquirer(s) of the Divestiture Assets,
defendants shall enter into a contract for transition services
customarily provided in connection with the sale of a business
providing mobile wireless telecommunications services or intellectual
property licensing sufficient to meet all or part of the needs of the
Acquirer for a period of up to one year. The terms and conditions of
any contractual arrangement meant to satisfy this provision must be
reasonably related to market conditions.
J. To the extent that the Divestiture Assets use intellectual
property, as required to be identified by Section II.K.(2), that cannot
be transferred or assigned without the consent of the licensor or other
third parties, defendants shall use their best efforts to obtain those
consents.
V. Appointment of Divestiture Trustee
A. If defendants have not divested the Divestiture Assets within
the time period specified in Section IV. A, defendants shall notify
plaintiff of that fact in writing specifically identifying the
Divestiture Assets that have not been divested. Then, upon application
of plaintiff, the Court shall appoint a Divestiture Trustee selected by
plaintiff and approved by the Court to effect the divestiture of the
Divestiture Assets. The Divestiture Trustee, will have all the rights
and responsibilities of the Management Trustee appointed pursuant to
the Preservation of Assets Stipulation and Order, and will be
responsible for:
(1) Accomplishing divestiture of all Divestiture Assets transferred
to the Divestiture Trustee from defendants in accordance with the terms
of this Final Judgment, to an Acquirer or Acquirers approved by
plaintiff, under Section IV.A of this Final Judgment;
(2) Exercising the responsibilities of the licensee of any
transferred Wireless Business Divestiture Assets and controlling and
operating any transferred Wireless Business Divestiture Assets, to
ensure that the business remain ongoing, economically viable
competitors in the provision of mobile wireless telecommunications
services in the sixteen (16) license areas specified in the Wireless
Business Divestiture Assets, until they are divested to an Acquirer or
Acquirers, and the Divestiture Trustee shall agree to be bound by this
Final Judgment; and
(3) Exercising the responsibilities of the licensee of any
transferred Cellular One Group Assets and controlling and operating any
transferred Cellular One Group Assets, to ensure that the business
remains ongoing and that the obligations of the Cellular One Group
under the Cellular One license agreements are fulfilled, and they are
divested to an Acquirer or Acquirers, and the Divestiture Trustee shall
agree to be bound by this Final Judgment.
B. Defendants shall submit a proposed trust agreement (``Trust
Agreement'') to plaintiff, which must be consistent with the terms of
this Final Judgment and which must receive approval by plaintiff in its
sole discretion, who shall communicate to defendants within ten (10)
business days its approval or disapproval of the proposed Trust
Agreement, and which must be executed by the defendants and the
Divestiture Trustee within five (5) business days after approval by
plaintiff.
C. After obtaining any necessary approvals from the FCC for the
assignment of the licenses of the remaining Divestiture Assets to the
Divestiture Trustee, defendants shall irrevocably divest the remaining
Divestiture Assets to the Divestiture Trustee, who will own such assets
(or own the stock of the entity owning such assets, if divestiture is
to be effected by the creation of such an entity for sale to
Acquirer(s)) and control such assets, subject to the terms of the
approved Trust Agreement.
D. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer(s)
acceptable to plaintiff, in its sole judgment, at such price and on
such terms as are then obtainable upon reasonable effort by the
Divestiture Trustee, subject to the provisions of Sections IV, V, and
VI of this Final Judgment, and shall have such other powers as this
Court deems appropriate. Subject to Section V.G of this Final Judgment,
the Divestiture Trustee may hire at the cost and expense of defendants
the Management Trustee appointed pursuant to the Preservation of Assets
Stipulation and Order, and any investment bankers, attorneys or other
agents, who shall be solely accountable to the Divestiture Trustee,
reasonably necessary in the Divestiture Trustee's judgment to assist in
the divestiture.
E. In addition, notwithstanding any provision to the contrary,
plaintiff, in its sole discretion, may require defendants to include
additional assets, or allow, with the written approval of plaintiff,
defendants to substitute substantially similar assets, which
substantially relate to the Wireless Business Divestiture Assets to be
divested by the Divestiture Trustee to facilitate prompt divestiture to
an acceptable Acquirer.
F. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objectives by defendants must be conveyed in writing to plaintiff
and the Divestiture Trustee within ten (10) calendar days after the
Divestiture
[[Page 44367]]
Trustee has provided the notice required under Section VI.
G. The Divestiture Trustee shall serve at the cost and expense of
defendants, on such terms and conditions as plaintiff approves, and
shall account for all monies derived from the sale of the assets sold
and all costs and expenses so incurred. After approval by the Court of
the Divestiture Trustee's accounting, including fees for its services
and those of any professionals and agents retained by the Divestiture
Trustee, all remaining money shall be paid to defendants and the trust
shall then be terminated. The compensation of the Divestiture Trustee
and any professionals and agents retained by the Divestiture Trustee
shall be reasonable in light of the value of the Divestiture Assets and
based on a fee arrangement providing the Divestiture Trustee with an
incentive based on the price and terms of the divestiture, and the
speed with which it is accomplished, but timeliness is paramount.
H. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestitures
including their best efforts to effect all necessary regulatory
approvals and will provide any necessary representations or warranties
as appropriate related to sale of the Divestiture Assets. The
Divestiture Trustee and any consultants, accountants, attorneys, and
other persons retained by the Divestiture Trustee shall have full and
complete access to the personnel, books, records, and facilities of the
business to be divested, and defendants shall develop financial and
other information relevant to the assets to be divested as the
Divestiture Trustee may reasonably request, subject to reasonable
protection for trade secrets or other confidential research,
development, or commercial information. Defendants shall take no action
to interfere with or to impede the Divestiture Trustee's accomplishment
of the divestitures.
I. After its appointment, the Divestiture Trustee shall file
monthly reports with plaintiff and the Court setting forth the
Divestiture Trusee's efforts to accomplish the divestitures ordered
under this Final Judgment. To the extent such reports contain
information that the Divestiture Trustee deems confidential, such
reports shall not be filed in the public docket of the Court. Such
reports shall include the name, address, and telephone number of each
person who, during the preceding month, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person. The Divestiture Trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
J. If the Divestiture Trustee has not accomplished such
divestitures within six (6) months after its appointment, the
Divestiture Trustee shall promptly file with the Court a report setting
forth (1) the Divestiture Trustee's efforts to accomplish the required
divestitures, (2) the reasons, in the Divestiture Trustee's judgment,
why the required divestitures have not been accomplished, and (3) the
Divestiture Trustee's recommendations. To the extent such reports
contain information that the Divestiture Trustee deems confidential,
such reports shall be filed in the public docket of the Court. The
Divestiture Trustee shall at the same time furnish such report to the
plaintiff, who shall have the right to make additional recommendations
consistent with the purpose of the trust. The Court thereafter shall
enter such orders as it shall deem appropriate to carry out the purpose
of the Final Judgment, which may, if necessary, include extending the
trust and the term of the Divestiture Trustee's appointment by a period
requested by plaintiff.
K. After defendants transfer the Divestiture Assets to the
Divestiture Trustee, and until those Divestiture Assets have been
divested to an Acquirer or Acquirers approved by plaintiff pursuant to
Sections IV.A and IV.H, the Divestiture Trustee shall have sole and
complete authority to manage and operate the Divestiture Assets and to
exercise the responsibilities of the licensee, and shall not be subject
to any control or direction by defendants. Defendants shall not retain
any economic interest in the Divestiture Assets transferred to the
Divestiture Trustee, apart from the right to receive the proceeds of
the sale or other disposition of the Divestiture Assets.
L. The Divestiture Trustee shall operate the Divestiture Assets
consistent with the Preservation of Assets Stipulation and Order and
this Final Judgment, with control over operations, marketing, sales and
Cellular One licensing. Defendants shall not attempt to influence the
business decisions of the Divestiture Trustee concerning the operation
and management of the Divestiture Assets, and shall not communicate
with the Divestiture Trustee concerning divestiture of the Divestiture
Assets or take any action to influence, interfere with, or impede the
Divestiture Trustee's accomplishment of the divestitures required by
this Final Judgment, except that defendants may communicate with the
Divestiture Trustee to the extent necessary for defendants to comply
with this Final Judgment and to provide the Divestiture Trustee, if
requested to do so, with whatever resources or cooperation may be
required to complete divestiture of the Divestiture Assets and to carry
out the requirements of the Preservation of Assets Stipulation and
Order and this Final Judgment. Except as provided in this Final
Judgment and the Preservation of Assets Stipulation and Order, in no
event shall defendants provide to, or receive from, the Divestiture
Trustee, the mobile wireless telecommunications services business, or
the Cellular One business under the Divestiture Trustee's control any
non-public or competitively sensitive marketing, sales, pricing or
other information relating to their respective mobile wireless
telecommunications services businesses.
VI. Notice of Proposed Divestitures
A. Within two (2) business days following execution of a definitive
divestiture agreement, defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestitures required herein,
shall notify plaintiff in writing of any proposed divestiture required
by Section IV or V of this Final Judgment. If the Divestiture Trustee
is responsible, it shall similarly notify defendants. The notice shall
set forth the details of the proposed divestiture and list the name,
address, and telephone number of each person not previously identified
who offered or expressed an interest in or desire to acquire any
ownership interest in Divestiture Assets, together with full details of
the same.
B. Within fifteen (15) calendar days of receipt by plaintiff of
such notice, plaintiff may request from defendants, the proposed
Acquirer or Acquirers, any other third party, or the Divestiture
Trustee if applicable additional information concerning the proposed
divestiture, the proposed Acquirer or Acquirers, and any other
potential Acquirer. Defendants and the Divestiture Trustee shall
furnish any additional information requested within fifteen (15)
calendar days of the receipt of the request, unless the parties shall
otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after plaintiff has been provided the
additional information requested from defendants, the proposed Acquirer
or Acquirers, any third party, and the Divestiture Trustee, whichever
is later, plaintiff shall provide written notice to defendants
[[Page 44368]]
and the Divestiture Trustee, if there is one, stating whether or not it
objects to the proposed divestiture. If plaintiff provides written
notice that it does not object, the divestiture may be consummated,
subject only to defendants' limited right to object to the sale under
section V.F of this Final Judgment. Absent written notice that
plaintiff does not object to the proposed Acquirer or upon objection by
plaintiff, a divestiture proposed under Section IV or Section V shall
not be consummated. Upon objection by defendants under Section V.F, a
divestiture proposed under Section V shall not be consummated unless
approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any divestiture
made pursuant to Section IV or V of this Final Judgment.
VIII. Preservation of Assets
Until the divestitures required by this Final Judgment have been
accomplished, defendants shall take all steps necessary to comply with
the Preservation of Assets Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestitures
ordered by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestitures have been completed under Section IV or V of this
Final Judgment, defendants shall deliver to plaintiff an affidavit as
to the fact and manner of its compliance with Section IV or V of this
Final Judgment. Each such affidavit shall include the name, address,
and telephone number of each person who during the preceding thirty
(30) days, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring, any interest in the Divestiture
Assets, and shall describe in detail each contact with any such person
during that period. Each such affidavit shall also include a
description of the efforts defendants have taken to solicit buyers for
the Divestiture Assets, and to provide required information to
prospective Acquirers, including the limitations, if any, on such
information. Assuming the information set forth in the affidavit is
true and complete, any objection by plaintiff, to information provided
by defendants, including limitation on information, shall be made
within fourteen (14) calendar days of receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to plaintiff an affidavit that
describes in reasonable detail all actions defendants have taken and
all steps defendants have implemented on an ongoing basis to comply
with Section VIII of this Final Judgment. Defendants shall deliver to
plaintiff an affidavit describing any changes to the efforts and
actions outlined in defendants' earlier affidavits provided pursuant to
this section within fifteen (15) calendar days after the change is
implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestitures have been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon written request of a duly authorized
representative of the Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice to defendants, be
permitted.
(1) Access during defendants' office hours to inspect and copy, or
at plaintiff's option, to require defendants provide copies of, all
books, ledgers, accounts, records and documents in the possession,
custody, or control of defendants, relating to any matters contained in
this Final Judgment; and
(2) To interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports, under oath if requested,
relating to any of the matters, contained in this Final Judgment as may
be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by plaintiff to any person other than an
authorized representative of the executive branch of the United States
or, pursuant to a customary protective order or waiver of
confidentiality by defendants, the FCC, except in the course of legal
proceedings to which the United States is a party (including grand jury
proceedings), or for the purpose of securing compliance with this Final
Judgment, or as otherwise required by law.
D. If at the time information or documents are furnished by
defendants to plaintiff, defendants represent and identify in writing
the material in any such information or documents to which a claim of
protection may be asserted under Rule 26(c)(7) of the Federal Rules of
Civil Procedure, and defendants mark each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then plaintiff shall give
defendants ten (10) calendar days notice prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
XI. No Reacquisition
Defendants may not reacquire or least any part of the Divestiture
Assets during the term of this Final Judgment provided however that (1)
defendants shall not be precluded from entering commercially reasonable
agreements, for a period not to exceed two (2) years from the date of
the closing of the Transaction, with the purchaser(s) of the Wireless
Business Divestiture Assets to obtain the right to use equipment that
defendant Western Wireless used to support both in GSM roaming business
and the provision of wireless services using other technological
formats and (2) defendants shall not be precluded from entering into
agreements with the purchaser of the Cellular One Group Assets to
license those assets for use (a) outside the United States, and (b) for
a period not to exceed one (1) year from the date of the closing of the
Transaction, within the United States.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
[[Page 44369]]
XIV. Public Interest Determination
Entry of this Final Judgment is in the public interest.
United States of America, Department of Justice, Antitrust Division,
1401 H Street, NW., Suite 8000, Washington, DC 20530, Plaintiff, v.
ALLTEL Corporation, One Allied Drive, Little Rock, Arkansas 72202
and Western Wireless Corporation, 3650 131st Avenue SE, Suite 400,
Bellevue, Washington 98006, Defendants;
Case Number 1:05CV01345
Judge: Royce C. Lamberth,
Deck Type: Antitrust,
Date Stamp: 07/06/2005.
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action to
enjoin the merger of two mobile wireless telecommunications service
providers, ALLTEL Corporation (``ALLTEL'') and Western Wireless
Corporation (``Western Wireless''), and to obtain other relief as
appropriate. Plaintiff alleges as follows:
1. On January 9, 2005, ALLTEL entered into an agreement to acquire
Western Wireless under which the two companies would combine their
mobile wireless telecommunications service businesses. Plaintiff seeks
to enjoin this transaction because it will substantially lessen
competition for mobile wireless telecommunications services in several
geographic markets where ALLTEL and Western Wireless are each other's
most significant competitor.
2. ALLTEL provides mobile wireless telecommunications services in
twenty-four (24) states serving approximately 8.8 million subscribers.
Western Wireless provides mobile wireless telecommunications services
in nineteen (19) states under the Cellular One service mark and in one
(1) license area in Texas under the Western Wireless service mark; it
has approximately 1.4 million subscribers. The combination of ALLTEL
and Western Wireless will substantially lessen competition for mobile
wireless telecommunications services in sixteen (16) geographic areas
in three (3) states, Arkansas, Kansas and Nebraska, where currently
both ALLTEL and Western Wireless operate. As a result of the proposed
acquisition, residents of these mostly rural areas will face the
likelihood of increased prices, diminished quality or quantity of
services provided, and less investment in network improvements for
these services.
1. Jurisdiction and Venue
3. This Complaint is filed by the United States under Section 15 of
the Clayton Act, 15 U.S.C. 25, to prevent and restrain defendants from
violating Section 7 of the Clayton Act, 15 U.S.C. 18.
4. ALLTEL and Western Wireless are engaged in interstate commerce
and in activities substantially affecting interstate commerce. The
Court has jurisdiction over this action pursuant to Sections 15 and 16
of the Clayton Act, 15 U.S.C. 25, 26 and 28 U.S.C. 1331, 1337.
5. The defendants have consented to personal jurisdiction and venue
in this judicial district.
II. The Defendants and the Transaction
6. ALLTEL, with headquarters in Little Rock, Arkansas, is a
corporation organized and existing under the laws of the state of
Delaware. ALLTEL is the sixth largest provider of mobile wireless voice
and data services in the United States by number of subscribers; it
serves approximately 8.8 million customers. It provides mobile wireless
telecommunications services in one hundred fifty-one (151) rural
service areas and in ninety-two (92) metropolitan statistical areas
located within twenty-four (24) states and roaming services to other
mobile wireless providers who use the CDMA platform in these areas.
ALLTEL provides local wireline telephone service to 3 million customers
primarily located in rural areas in fifteen (15) states. In 2004,
ALLTEL earned revenues of approximately $8.2 billion.
7. Western Wireless, with headquarters in Bellevue, Washington, is
a corporation organized and existing under the laws of the state of
Washington. Western Wireless is the ninth largest provider of mobile
wireless voice and data services in the United States by number of
subscribers; it serves approximately 1.4 million customers. It operates
in eighty-eight (88) rural service areas and nineteen (19) metropolitan
statistical areas located within nineteen (19) western states. Western
Wireless also provides in its service areas roaming services to other
providers who use CDMA, TDMA and GSM technology. Through its
subsidiary, Western Wireless International, it provides communications
services in seven (7) countries outside of the United States. Western
Wireless owns the Cellular One Group, a general partnership that owns
the Cellular One service mark and licenses use of the mark to other
mobile wireless providers. In 2004, Western earned approximately $1.9
billion in revenues.
8. Pursuant to an agreement and Plan of Merger dated January 9,
2005, ALLTEL will acquire Western Wireless in a stock-and-cash
transaction valued at approximately $6 billion. If this transaction is
consummated, ALLTEL and Western Wireless combined would have
approximately 10 million subscribers in the United States, with $10.1
billion in revenues and operations in thirty-three (33) states.
III. Trade and Commerce
A. Nature of Trade and Commerce
9. Mobile wireless telecommunications services allow customers to
make and receive telephone calls and use data services using radio
transmissions without being confined to a small area during the call or
data session, and without the need for unobstructed line-of-sight to
the radio tower. Mobility is highly prized by customers, as
demonstrated by the more than 180 million people in the United States
who own mobile wireless telephones. In 2004, revenues from the sale of
mobile wireless services in the United States were over $100 billion.
To meet this desire for mobility, mobile wireless telecommunications
providers must deploy an extensive network of switches and radio
transmitters and receivers, and interconnect this network with the
networks of wireline carriers and with other wireless providers.
10. The first wireless voice systems were based on analog
technology, now referred to as first-generation or ``IG'' technology.
These analog systems were launched after the FCC issued the first
licenses for mobile wireless telephone service: two cellular licenses
(A-block and B-block) in each geographic area in the early to mid-
1980s. The licenses are in the 800 MHz range of the radio spectrum,
each license consists of 25 MHz of spectrum, and they are issued for
each Metropolitan Statistical Area (``MSA'') and Rural Service Area
(``RSA'') (collectively, ``Cellular Marketing Areas'' or ``CMAs''),
with a total of 734 CMAs covering the entire United States. In 1982,
one of the licenses was issued to the incumbent local exchange carrier
in the market, and the other was issued by lottery to someone other
than the incumbent.In the relevant geographic markets, ALLTEL and
Western Wireless each own one of the cellular licenses.
11. In 1995, the FCC allocated and subsequently issued licenses for
additional spectrum for the provision of Personal Communications
Services (``PCS''), a category of services that includes mobile
wireless telecommunications services comparable to those offered by
cellular licensees. These licenses are in the 1.8
[[Page 44370]]
GHz range of the radio spectrum and are divided into six blocks: A, B,
and C, which consists of 30 MHz each; and D, E, and F, which consist of
10 MHz each. Geographically, the A and B-block 30 MHz licenses are
issued by Major Trading Areas (``MTAs''), and C, D, E, and F-block
licenses are issued by Basic Trading Areas (``BTAs''), several of which
comprise each MTA. MTAs and BTAs do not generally correspond to MSAs
and RSAs. With the introduction of the PCS licenses, both cellular and
PCS licensees began offering digital services, thereby increasing
capacity, shrinking handsets, and extending battery life. In 1996, one
provider, a specialized mobile radio (``SMR'' or ``dispatch'') spectrum
licensee, began to use its SMR spectrum to offer mobile wireless
telecommunications services comparable to those offered by other mobile
wireless telecommunications services providers, in conjunction with its
dispatch, or ``push-to-talk,'' service. Although there are a number of
providers holding spectrum licenses in each areas of the country, not
all providers have fully built out their networks throughout each
license area. In particular, because of the characteristics of PCS
spectrum, providers holding this type of spectrum have found it less
attractive to build out in rural areas.
12. Today, more than 90 percent of all mobile wireless
telecommunications services customers have digital service, and nearly
all mobile wireless voice service has migrated to second-generation or
``2G'' digital technologies: TDMA (time division multiple access), GSM
(global standard for mobile, a type of TDMA standard used by all
carriers in Europe), and CDMA (code division multiple access). Mobile
wireless telecommunications services providers have chosen to build
their networks on these incompatible technologies and most have chosen
CDMA or GSM, with TDMA have been orphaned by equipment vendors. (The
SMR providers use a fourth incompatible technological standard better
suited to the spectrum they own, and, as SMR licensees, they have no
obligation to support a specific technology standard.) Even more
advanced technologies (``2.5G'' and ``3G'') have begun to be deployed
for voice and data.
B. Relevant Product Market
13. Mobile wireless telecommunications services is a relevant
product market. Mobile wireless telecommunications services include
both voice and data services provided over a radio network and allows
customers to maintain their telephone calls or data sessions without
wires, such as when traveling. There are no cost-effective alternatives
to mobile wireless telecommunications services. Fixed wireless services
are not mobile, and other wireless services have a limited range (e.g.,
Wi-Fi); neither offers a viable alternative to mobile wireless
telecommunications service. It is unlikely that a sufficient number of
customers would switch away from mobile wireless telecommunications
services to make a small but significant price increase in those
services unprofitable. Mobile wireless telecommunications services is a
relevant product market under section 7 of the Clayton Act, 15 U.S.C.
18.
C. Relevant Geographic Markets
14. The large majority of customers use mobile wireless
telecommunications services in close proximity to their workplaces and
homes. Thus, customers purchasing mobile wireless telecommunications
services choose among mobile wireless telecommunications services
providers that offer services where they are located and travel on a
regular basis: home, work, other areas they commonly visit, and areas
in between. The number and identity of mobile wireless
telecommunications services providers varies among geographic areas,
along with the quality of their service sand the breadth of their
geographic coverage, all of which are significant factors in customers'
purchasing decisions. Mobile wireless telecommunications services
providers can and do offer different promotions, discounts, calling
plans, and equipment subsidies in different geographic areas,
effectively varying the price for customers by geographic area.
15. The United States comprises numerous local geographic markets
for mobile wireless telecommunications services. The FCC has licensed a
limited number of mobile wireless telecommunications services providers
in each local area based upon the availability of radio spectrum. These
FCC spectrum licensing areas often represent the core of the business
and social sphere where customers face the same competitive choices for
mobile wireless telecommunications services. The relevant geographic
markets in which this transaction will substantially lessen competition
in mobile wireless telecommunications services are effectively
represent, but not defined, by FCC spectrum licensing areas.
16. The relevant geographic markets, under Section 7 of the Clayton
Act, 15 U.S.C. 18, where the transaction will substantially lessen
competition for mobile wireless telecommunications services are
represented by the following FCC spectrum licensing areas which are all
Rural Service Areas: Arkansas RSA-11 (CMA 334), Kansas RSA-3 (CMA 430),
Kansas RSA-4 (CMA 431), Kansas RSA-8 (CMA 435), Kansas RSA-9 (CMA 436),
Kansas RSA-10 (CMA 437), Kansas RSA-14 (CMA 441), Nebraska RSA-2 (CMA
534), Nebraska RSA-3 (CMA 535), Nebraska RSA-4 (CMA 536), Nebraska RSA-
5 (CMA 537), Nebraska RSA-6 (CMA 538), Nebraska RSA-7 (CMA 539),
Nebraska RSA-8 (CMA 540), Nebraska RSA-9 (CMA 541), Nebraska RSA-10
(CMA 542). It is unlikely that a sufficient number of customers would
switch to mobile wireless telecommunications services providers in a
different geographic market to make a small but significant price
increase in the relevant geographic markets unprofitable for mobile
wireless telecommunications services.
D. Anticompetitive Effects
1. Mobile Wireless Telecommunications Services
17. The companies' combined market shares for mobile wireless
telecommunications services in the relevant markets described above, as
measured in terms of subscribers, range from over 50 to nearly 100
percent. In each relevant geographic market, ALLTEL has the largest
market share and, in all but four (4) RSAs, Western Wireless is the
second-largest mobile wireless telecommunications services provider. In
all of the relevant geographic markets, ALLTEL and Western Wireless own
the only 800 MHz band cellular spectrum licenses, which are more
efficient in serving rural areas than 1900 MHz band PCS spectrum. As a
result of holding the cellular spectrum licenses and being early
entrants into these markets, ALLTEL's and Western Wireless' networks
provide greater depth and breadth of coverage than their competitors,
which are operating on PCS spectrum in the relevant geographic markets,
and thus are more attractive to consumers.
In addition, mobile wireless telecommunications services providers
with partial coverage in a geographic area do not aggressively market
their services in these markets because potential customers would use
their wireless telephones primarily in areas where these providers have
no network. In theory, these less-built-out providers could serve
residents of the rural areas through roaming agreements, but as a
practical matter when service is
[[Page 44371]]
provided on another carrier's network, the providers have to pay
roaming charges to, and rely on, that provider to maintain the quality
of the network. Because of these constraints, carriers with limited
network coverage in an area are reluctant to market their services to
residents of that area. Therefore, ALLTEL and Western Wireless are
likely closer substitutes for each other than the other mobile wireless
services providers who own only PCS spectrum in the relevant geographic
markets.
18. The relevant geographic markets for mobile wireless services
are highly concentrated. As measured by the Herfindahl-Hirschman Index
(``HHI''), which is commonly employed in merger analysis and is defined
and explained in Appendix A to this Complaint, concentration in these
markets ranges from over 2100 to more than 8500, which is well above
the 1800 threshold at which the Department considers a market to be
highly concentrated. After ALLTEL's proposed acquisition of Western
wireless is consummated, the HHIs in the relevant geographic markets
will range from over 3400 to almost 9700, with increases in the HHI as
a result of the merger ranging from over 1100 to over 4600,
significantly beyond the thresholds at which the Department considers a
transaction likely to cause competitive harm.
19. Competition between ALLTEL and Western Wireless in the relevant
geographic markets has resulted in lower prices and higher quality in
mobile wireless telecommunications services, than would otherwise have
existed in these geographic markets. In these areas, consumers consider
ALLTEL and Western Wireless to be the most attractive competitors
because other providers' networks lack coverage or provide lower
quality service. If ALLTEL's proposed acquisition of Western Wireless
is consummated, the relevant geographic markets for mobile wireless
telecommunications services will become substantially more
concentrated, and the competition between ALLTEL and Western Wireless
in mobile wireless telecommunications service will be eliminated in
these markets. As a result, the loss of competition between ALLTEL and
Western Wireless increases the likelihood of unilateral actions by the
merged firm in the relevant geographic markets to increase prices,
diminish the quality or quantity of services provided, and refrain from
or delay making investments in network improvements. Therefore,
ALLTEL's proposed acquisition of Western Wireless will likely result in
substantially less competition in mobile wireless telecommunications
services in the relevant geographic markets.
2. Entry
20. Entry by a new mobile wireless telecommunications services
provider in the relevant geographic markets would be difficult, time-
consuming, and expensive, requiring the acquisition of spectrum
licenses and the build-out of a network. Expansion by providers who
hold spectrum in these areas is also unlikely as the relevant
geographic markets are rural service areas where the combined firm
would own all of the available 800 MHz cellular spectrum. Due to
propagation characteristics of 800 MHz cellular spectrum and 1900 MHz
PCS spectrum, the 800 MHz signals can cover a substantially broader
area than the 1900 MHz signals. The estimated coverage advantage of the
800 MHz cellular spectrum in rural areas ranges from two to as much as
five times greater than PCS. In rural markets, this difference results
in higher build-out costs for PCS networks than for cellular networks.
The high costs of constructing PCS networks in rural markets combined
with the relatively low population density makes it less likely that
carriers that own PCS spectrum would build out in the relevant
geographic markets. Therefore, new entry in response to a small but
significant price increase for mobile wireless services by the merged
firm in the relevant geographic markets would not be timely, likely, or
sufficient to thwart the competitive harm resulting from ALLTEL's
proposed acquisition of Western Wireless, if it were to be consummated.
IV. Violation Alleged
21. The effect of ALLTEL's proposed acquisition of Western
Wireless, if it were to be consummated, may be substantially to lessen
competition in interstate trade and commerce in the relevant geographic
markets for mobile wireless telecommunications services, in violation
of section 7 of the Clayton Act, 15 U.S.C. 18.
22. Unless restrained, the transaction will likely have the
following effects in mobile wireless telecommunications services in the
relevant geographic markets, among others:
a. Actual and potential competition between ALLTEL and Western
Wireless will be eliminated;
b. Competition in general will be lessened substantially;
c. Prices are likely to increase;
d. The quality and quantity of services are likely to decrease; and
e. incentives to improve wireless networks will be reduced.
V. Requested Relief
23. That ALLTEL's proposed acquisition of Western Wireless be
adjudged to violate section 7 of the Clayton Act, 15 U.S.C. 18;
24. That defendants be permanently enjoined from and restrained
from carrying out the Agreement and Plan of Merger, dated January 9,
2005, or from entering into or carrying out any agreement,
understanding, or plan, the effect of which would be to bring the
wireless services businesses of ALLTEL and Western Wireless under
common ownership or control;
25. That plaintiffs be awarded their costs of this action; and
26. That plaintiffs have such other relief as the Court may deem
just and proper.
Dated: July 6, 2005.
Respectfully Submitted,
For Plaintiff United States of America:
Thomas O. Barnett,
Acting Assistant Attorney General, Antitrust Division.
J. Bruce McDonald,
Deputy Assistant Attorney General, Antitrust Division.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
Nancy Goodman (D.C. 251694),
Chief, Telecommunications & Media, Enforcement Section, Antitrust
Division.
Laury Bobbish,
Assistant Chief, Telecommunications & Media Enforcement Section,
Antitrust Division.
Deborah A. Roy (D.C. Bar 452573),
Laura R. Starling,
Hillary B. Burchuk (D.C. Bar 366755),
Matthew C. Hammond.
Attorneys, Telecommunications & Media, Enforcement Section,
Antitrust Division.
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Suite 8000, Washington, DC 20530, (202) 514-5621, Facsimile:
(202)514-6381.
Appendix A--Herfindahl-Hirschman Index
``HHI'' means the Herfindahl-Hirschman Index, a commonly
accepted measure of market concentration. It is calculated by
squaring the market share of each firm competing in the market and
then summing the resulting numbers. For example, for a market
consisting of four firms with shares of 30, 30, 20, and 20 percent,
the HHI is 2600 (302 + 302 + 202 +
202 = 2600). (Note: Throughout the Complaint, market
share percentage have been rounded to the nearest whole number, but
HHIs have been estimated using unrounded percentages in order to
accurately reflect the concentration of the various markets.) The
HHI takes into account the relative size distribution of the firms
in
[[Page 44372]]
a market and approaches zero when a market consists of a large
number of small firms. The HHI increases both as the number of firms
in the market decreases and as the disparity in size between firms
increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI
is in excess of 1800 points are considered to be highly
concentrated. See Horizontal Merger Guidelines ] 1.51 (revised Apr.
8, 1997). Transactions that increase the HHI by more than 100 points
in concentrated markets presumptively raise antitrust concerns under
the guidelines issued by the U.S. Department of Justice and Federal
Trade Commission. See id.
United States of America, Plaintiff. v. ALLTEL Corporation and
Western Wireless Corporation, Defendants.
Preservation of Assets Stipulation and Order
It is hereby stipulated and agreed by and between the undersigned
parties, subject to approval and entry by the Court, that:
I. Definitions
As used in this Preservation of Assets Stipulation and Order:
A. ``Acquirer'' of ``Acquirers'' means the entity or entities to
whom defendants divest the Divestiture Assets.
B. ``ALLTEL'' means defendant ALLTEL Corporation, a Delaware
corporation with headquarters in Little Rock, Arkansas, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Cellular One Group'' means the Delaware general partnership,
with headquarters in Bellevue, Washington, engaged in the business of
licensing and promoting the Cellular One service mark and certain
related trademarks, service marks, and designs.
D. ``Cellular One Group Assets' means all legal and economic
interests Western Wireless holds in the Cellular One Group. Cellular
One Group Assets shall include all right, title and interest in
trademarks, trade names, service marks, service names, designs, and
intellectual property, all license agreements for use of the Cellular
One mark, technical information, computer software and related
documentation, and all records relating to the divestiture assets.
E. ``CMA'' means cellular market area which is used by the Federal
Communications Commission (``FCC'') to define cellular license areas
and which consists of Metropolitan Statistical Areas (``MSAs'') and
Rural Service Areas (``RSAs'').
F. ``Divestiture Assets'' means the Wireless Business Divestiture
Assets and the Cellular One Group Assets.
G. ``GSM'' means global system for mobile communications which is
one of the standards used for the infrastructure of digital cellular
service.
H. ``Multi-line Business Customer'' means a corporate or business
customer that contracts with Western Wireless for mobile wireless
services to provide multiple telephones to its employees or members
whose services are provided pursuant to a contract with the corporate
or business customer.
I. ``Transaction'' means the Agreement and Plan of Merger between
ALLTEL and Western Wireless, dated January 9, 2005.
J. ``Western Wireless'' means defendant Western Wireless
Corporation, incorporated in the state of Washington with headquarters
in Bellevue, Washington, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships and joint
ventures, and their directors, officers, managers, agents, and
employees.
K. ``Wireless Business Divestiture Assets'' means, for each mobile
wireless telecommunications business to be divested under this Final
Judgment, all types of assets, tangible and intangible, used by
defendants in the operation of the mobile wireless telecommunications
businesses to be divested. ``Wireless Business Divestiture Assets''
shall be construed broadly to accomplish the complete divestitures of
the entire business of Western Wireless in each of the following RSA
license areas as required by the Final Judgment and to ensure that the
divested mobile wireless telecommunications businesses remain viable,
ongoing businesses:
(a) Arkansas RSA-11 (CMA 334);
(b) Kansas RSA-3 (CMA 430);
(c) Kansas RSA-4 (CMA 431);
(d) Kansas RSA-8 (CMA 435);
(e) Kansas RSA-9 (CMA 436);
(f) Kansas RSA-10 (CMA 437);
(g) Kansas RSA-14 (CMA 441);
(h) Nebraska RSA-2 (CMA 534);
(i) Nebraska RSA-3 (CMA 535);
(j) Nebraska RSA-4 (CMA 536);
(k) Nebraska RSA-5 (CMA 537);
(l) Nebraska RSA-6 (CMA 538);
(m) Nebraska RSA-7 (CMA 539);
(n) Nebraska RSA-8 (CMA 540);
(o) Nebraska RSA-9 (CMA 541); and
(p) Nebraska RSA-10 (CMA 542);
provided that ALLTEL may retain all of the PCS spectrum currently held
by Western Wireless in each of these RSAs and provided that ALLTEL need
not divest the assets used solely to operate Western Wireless' GSM
roaming business, including GSM roaming contracts and equipment.
Wireless Busienss Divestiture Assets shall include, without
limitation, all types of real and personal property, monies and
financial instruments, equipment, inventory, office furniture, fixed
assets and furnishings, supplies and materials, contracts, agreements,
leases, commitments, spectrum licenses issued by the FCC and all other
licenses, permits and authorizations, operational support systems, cell
sites, network infrastructure, switches, customer support and billing
systems, interfaces with other service providers, business and customer
records and information, customer contracts, customer lists, credit
records, accounts, and historic and current business plans which relate
primarily to the wireless business being divested, as well as any
patents, licenses, sub-licenses, trade secrets, know-how, drawings,
blueprints, designs, technical and quality specifications and
protocols, quality assurance and control procedures, manuals and other
technical information defendants supply to their own employees,
customers, suppliers, agents, or licensees, and trademarks, trade names
and service marks or other intellectual property, including all
intellectual property rights under third-party licenses that are
capable of being transferred to an Acquirer either in their entirety,
for assets described in (1) below, or through a license obtained
through or from Western Wireless, for assets described in (2) below;
provided that defendants shall only be required to divest Multi-line
Business Customer contracts, if the primary business address for that
customer is located within any of the sixteen (16) license areas
described herein, and further, any subscribers who obtain mobile
wireless telecommunications services through any such contract retained
by defendants and who are located within the sixteen (16) geographic
areas identified above, shall be given the option to terminate their
relationship with defendants, without financial cost, within one year
of the closing of the Transaction. Defendants shall provide written
notice to these subscribers within forty-five (45) days after the
closing of the Transaction of the option to terminate.
These divestitures of the Wireless Business Divestiture Assets
shall be accomplished by:
(1) Transferring to the Acquirers the complete ownership and/or
other rights to the assets (other than those assets used substantially
in the operations of Western Wireless' overall wireless
telecommunications services business which must be retained to continue
the existing operations of the wireless properties that defendants are
not required to divest, and that either are
[[Page 44373]]
not capable of being divided between the divested wireless businesses
and those not divested, or are assets that the defendants and the
Acquirer(s) agree, subject to approval of plaintiff, shall not be
divided); and
(2) Granting to the Acquirer(s) an option to obtain a non-
exclusive, transferable license from defendants for a reasonable
period, subject to approval of plaintiff, at the election of an
Acquirer to use any of Western Wireless' retained assets under
paragraph (1) above, used in the operation of the wireless
telecommunications services business being divested, so as to enable
the Acquirer to continue to operate the divested mobile wireless
telecommunications services business without impairment. Defendants
shall identify in a schedule submitted to plaintiff and filed with the
Court, as expeditiously as possible following the filing of the
Complaint and in any event prior to any divestitures and before the
approval by the Court of this Final Judgment, and intellectual property
rights under third-party licenses that are used by the mobile wireless
telecommunications services businesses being divested but that
defendants could not transfer to an Acquirer entirely or by license
without third-party consent, and the specific reasons why such consent
is necessary and how such consent would be obtained for each asset.
II. Objectives
The Final Judgment filed in this case is meant to ensure
defendants' prompt divestiture of the Divestiture Assets for the
purpose of preserving viable competitors in the provision of mobile
wireless telecommunications services in order to remedy the effects
that plaintiff alleges would otherwise result from ALLTEL's acquisition
of Western Wireless. This Preservation of Assets Stipulation and Order
ensures, prior to such divestitures, that competition is maintained
during the pendency of the ordered divestitures, and that the
Divestiture Assets remain ongoing business concerns and the Divestiture
Assets remain economically viable. The Divestiture Assets will remain,
as provided herein, preserved, independent and uninfluenced by
defendants.
III. Jurisdiction and Venue
This Court has jurisdiction over the subject matter of this action
and each of the parties hereto, and venue of this action is proper in
the United States District Court for the District of Columbia. The
Complaint states a claim upon which relief may be granted against
defendants under section 7 of the Clayton Act, 15 U.S.C. 18.
IV. Compliance With and Entry of Final Judgment
A. The parties stipulate that a proposed Final Judgment in the form
attached hereto as Exhibit A may be filed with and entered by the
Court, upon the motion of any party or upon the Court's own motion, at
any time after compliance with the requirements of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16, and without further notice
to any party or other proceedings, provided that the plaintiff has not
withdrawn its consent, which it may do at any time before the entry of
the proposed Final Judgment by serving notice thereof on defendants and
by filing that notice with the Court.
B. Defendants shall abide by and comply with the provisions of the
proposed Final Judgment, pending the Judgment's entry by the Court, or
until expiration of time for all appeals of any Court ruling declining
entry of the proposed Final Judgment, and shall, from the date of the
signing of this Stipulation by the parties, comply with all the terms
and provisions of the proposed Final Judgment as though the same were
in full force and effect as an order of the Court.
C. Defendants shall not consummate the transaction sought to be
enjoined by the Complaint herein before the Court has signed this
Preservation of Assets Stipulation and Order.
D. This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
E. In the event (1) plaintiff has withdrawn its consent, as
provided in Section IV.A above, or (2) the proposed Final Judgment is
not entered pursuant to this Stipulation, the time has expired for all
appeals of any Court ruling declining entry of the proposed Final
Judgment, and the Court has not otherwise ordered continued compliance
with the terms and provisions of the proposed Final Judgment, then the
parties are released from all further obligations under this
Stipulation, and the making of this Stipulation shall be without
prejudice to any party in this or any other proceeding.
F. Defendants represent that the divestitures ordered in the
proposed Final Judgment can and will be made, and that defendants will
later raise no claim of mistake, hardship or difficulty of compliance
as grounds for asking the Court to modify any of the provisions
contained therein.
V. Management Trainee
A. Plaintiff nominates David S. Turetsky as Management Trustee in
this case, and defendants have no objection to his immediate
appointment by this Court. Accordingly, this Court appoints David S.
Turetsky as Management Trustee to serve as manager of the Divestiture
Assets until the Divestiture Assets are sold or transferred to a
Divestiture Trustee pursuant to Section V of the proposed Final
Judgment. Nothing in this Stipulation shall be interpreted to prevent
the Management Trustee from becoming the Divestiture pursuant to
Section V of the proposed Final Judgment.
B. Prior to the closing of the Transaction, defendants shall enter
into a trust agreement with David S. Turetsky, subject to the approval
of plaintiff in its sole discretion, that will grant the rights,
powers, and authorities necessary to permit him to perform the duties
and responsibilities of the Management Trustee pursuant to this
Stipulation. The trust agreement shall enable him to assume all rights,
powers, and authorities necessary to perform his duties and
responsibilities, pursuant to this Stipulation and proposed Final
Judgment and consistent with their purposes. David S. Turetsky or any
other subsequently appointed Management Trustee shall serve as the cost
and expense of defendants, on such terms and conditions as plaintiff
approves, with a fee arrangement that is reasonable in light of the
person's experience and responsibilities.
C. The Management Trustee will have the following powers and
responsibilities with respect to the Divestiture Assets:
(1) The Management Trustee will have the power to manage the
Divestiture Assets in the ordinary course of business consistent with
this Stipulation. Only with the prior written approval of plaintiff,
may the Management Trustee make any decision, take any action, or enter
any transaction that is outside the ordinary course of business;
(2) The Management Trustee shall have a duty, consistent with the
terms of this Stipulation and the proposed Final Judgment, to monitor
the organization of the Divestiture Assets; manage the Divestiture
Assets in order to maximize their value so as to permit expeditious
divestitures in a manner consistent with the proposed Final Judgment;
maintain the independence of the Divestiture Assets from defendants,
control and operate the
[[Page 44374]]
Wireless Business Divestiture Assets to ensure that the Wireless
Business Divestiture Assets remain an independent, ongoing,
economically viable competitor to the other mobile wireless
telecommunications services providers; manage the Cellular One Group
Assets in a manner so as to maintain the business and value of the
intellectual property including trademarks and service marks; and
assure defendants' compliance with their obligations pursuant to this
Stipulation and the proposed Final Judgment;
(3) The Management Trustee shall have the authority to retain, the
cost and expense of defendants, such consultants, accountants,
attorneys, and other representatives and assistants as are reasonably
necessary to carry out the Management Trustee's duties and
responsibilities;
(4) The Management Trustee and any consultants, accountants,
attorneys, and any other person retained by the Management Trustee,
shall have full and complete access to all personnel, books, records,
documents, and facilities of the Divestiture Assets or to any other
relevant information as the Management Trustee may reasonably request,
including, but not limited to, all documents and records kept in the
normal course of business that relate to the Divestiture Assets.
Defendants shall develop such financial or other information as the
Management Trustee may request and shall cooperate with the Management
Trustee. Defendants shall take no action to interfere with or impede
the Management Trustee's ability to monitor defendants' compliance with
this Stipulation and the proposed Final Judgment or otherwise to
perform his duties and responsibilities consistent with the terms of
this Stipulation and the proposed Final Judgment;
(5) The Management Trustee will ensure that the Divestiture Sets
shall be staffed with sufficient employees to maintain their viability
and competitiveness. To the extent that any employee whose principal
responsibilities relate to the Divestiture Assets leaves or has left
the Divestiture Assets prior to divestiture of the Divestiture Assets,
the Management Trustee may replace departing or departed employees with
persons who have similar experience and expertise or determine not to
replace such departing or departed employees; and
(6) Thirty (30) days after the Management Trustee has been
appointed by the Court, and every thirty (30) days thereafter until the
Divestiture Assets are either transferred to an Acquirer or to the
Divestiture Trustee, the Management Trustee shall report in writing to
the plaintiff concerning the efforts to accomplish the purposes of this
Stipulation and the proposed Final Judgment. Included within that
report shall be the Management Trustee's assessment of the extent to
which the Divestiture Assets are meeting (or exceeding) their projected
goals as are reflected in existing or revised operating plans, budgets,
projections or any other regularly prepared financial statements and
the extent to which defendants are fulfilling their responsibilities
under this Stipulation and the proposed Final Judgment.
D. The following limitations shall apply to the Management Trustee:
(1) The Management Trustee shall not be involved, in any way, in
the operations of other businesses of defendants;
(2) The Management Trusteee shall have no financial interests
affected by defendants' revenues, profits or profit margins, except
that the Management Trustee's compensation for managing the Divestiture
Assets may include economic incentives dependent on the financial
performance of the Divestiture Assets provided that those incentives
are consistent with the objectives of this Stipulation and the proposed
Final Judgment and are approved by plaintiff; and
(3) The Management Trustee shall be prohibited from performing any
further work for defendants for two (2) years after the close of the
divestiture transactions.
E. Defendants and the Management Trustee will take all reasonable
efforts to preserve the confidentiality of information that is material
to the operation of either the Divestiture Assets or defendants'
businesses. Defendants' personnel supplying services to the Divestiture
Assets pursuant to this Stipulation must retain and maintain the
confidentiality of any and all confidential information material to the
Divestiture Assets. Except as permitted by this Stipulation and the
proposed Final Judgment, such persons shall be prohibited from
providing, discussing, exchanging, circulating or otherwise furnishing
the confidential information of the Divestiture Assets to or with any
person employment involves any of defendants' businesses, except as
necessary to fulfill the purposes of this Stipulation and the proposed
Final Judgment.
F. If in the judgment of the Management Trustee, defendants fail to
provide the services listed in Section VI of this Stipulation to the
satisfaction of the Management Trustee, upon notification to defendants
and approval by plaintiff, the Management Trustee may engage third
parties unaffiliated with the defendants to provide those services for
the Divestiture Assets, at the cost and expense of defendants, provided
that defendants may have reasonable access to information to satisfy
themselves that after the services have been provided, the Divestiture
Assets are in compliance with all applicable laws, rules and
regulations.
G. At the option of the Management Trustee, defendants may also
provide other products and services, on an arms-length basis provided
that Management Trustee is not obligated to obtain any other product or
service from defendants and may acquire any such products or services
from third parties unaffiliated with defendants.
H. If the Management Trustee ceases to act or fails to act
diligently and consistently with the purposes of this Stipulation and
the proposed Final Judgment, if the Management Trustee proposed by
plaintiff is not approved by this Court or resigns, or if for any other
reason the Management Trustee ceases to serve in his or her capacity as
Management Trustee, the United States may select a substitute
Management Trustee. In this event, plaintiff will identify to
defendants the individual or entity it proposes to select as Management
Trustee. Defendants must make any such objection to this selection
within five (5) business days after plaintiff notifies defendants of
the Management Trustee's selection. Upon application of the United
States, the Court shall approve and appoint a substitute Management
Trustee. Within five (5) business days of such appointment, defendants
shall enter into a trust agreement with the Management Trustee subject
to the approval of plaintiff in its sole discretion as described in
Section V.B of this Stipulation.
VI. Preservation of Assets
Until the divestitures required by the proposed Final Judgment have
been accomplished, except as otherwise approved in advance in writing
by plaintiff:
A. Defendants and the Management Trustee shall preserve, maintain,
and continue to support the Divestiture Assets, take all steps
necessary to manage the Divestiture Assets in order to maximize their
revenue, profitability and viability and permit expeditious
divestitures in a manner consistent with this Stipulation and the
proposed Final Judgment.
B. The Wireless Business Divestiture Assets shall be operated by
the
[[Page 44375]]
Management Trustee as part of an independent, ongoing, economically
viable competitive business to other mobile wireless telecommunications
services providers operating in the same license area. The Cellular One
Group Assets shall be managed by the Management Trustee so that the
value of the Cellular One brand is maintained, and all obligations
under existing licensing agreements are fulfilled, and these assets are
maintained or increased in value. Defendants and the Management Trustee
shall take all steps necessary to ensure that:
(1) The management, sales, and operations of the Divestiture Assets
are independent from defendants' other operations; provided however,
that at the request of the Divestiture Assets, defendants shall include
the marketing, pricing and sales of the mobile wireless
telecommunications services generated by the Wireless Business
Divestiture Assets in the license areas served by the Wireless Business
Divestiture Assets within its marketing, promotional, and service
offerings, in the ordinary course of business, in any national,
regional, and local marketing programs. The defendants shall not
display advertising announcing or describing benefits of the
Transaction in the sixteen (16) divestiture markets. Nothing in this
Section shall prohibit the Divestiture Assets from developing his own
reasonable marketing, sales, pricing or promotion offers, which shall
be funded and supported by defendants;
(2) The Wireless Business Divestiture Assets are maintained by
adhering to normal and planned repair, capital improvement, upgrade and
maintenance schedules;
(3) The management of the Divestiture Assets will not be influenced
by defendants;
(4) The books, records, competitively sensitive sales, marketing
and pricing information, and decision-making concerning marketing,
pricing or sales of mobile wireless telecommunications services or the
Cellular One mark generated by the Divestiture Assets will by kept
separate and apart from the defendants' other operations; and
(5) The management of the Divestiture Assets acts to maintain and
increase the sales and revenues of the Divestiture Assets, and
maintain, at a minimum, at previously approved levels for 2005 and
2006, whichever are higher, all promotional, advertising, sales,
marketing, and technical support for the Divestiture Assets.
C. Defendants shall provide sufficient working capital and lines
and sources of credit as deemed necessary by the Management Trustee to
continue to maintain the Divestiture Assets consistent with this
Stipulation.
D. Defendants shall resolve all outstanding obligations related to
the Divestiture Assets including agent and employee compensation within
thirty (30) days of closing the Transaction.
E. Except (1) as recommended by the Management Trustee and approved
by plaintiff, or (2) as part of a divestiture approved by plaintiff in
accordance with the terms of the proposed Final Judgment, defendants
shall not remove, sell, lease, assign, transfer, pledge or otherwise
dispose of any of the Divestiture Assets outside the ordinary course of
business.
F. The Management Trustee, with defendants' cooperation consistent
with this Stipulation and the proposed Final Judgment, shall maintain,
in accordance with sound accounting principles, separate, accurate, and
complete financial ledgers, books and records that report on a periodic
basis, such as the last business day of every month, consistent with
past practices, the assets, liabilities, expenses, revenues, and income
of the Divestiture Assets. As part of the defendants' cooperation, at
least five (5) days prior to the closing of the Transaction, defendants
will provide to the Management Trustee and plaintiff three (3) separate
financial reports for the divestiture markets in each of Arkansas,
Kansas, and Nebraska, and separately for each of the sixteen (16)
divested RSAs, detailed management reports describing existing and
future plans for human resources, marketing, network upgrades and
capital expenditures. Defendants will produce these reports in a form
and with content that is acceptable to the Management Trustee and
plaintiff.
G. As part of the defendants' cooperation, at least five (5) days
prior to the closing of the Transaction, defendants will provide all
reports regularly prepared by defendant Western Wireless that measure
sales activity in each of the sixteen (16) divestiture markets,
including but not limited to the Daily Activity Report and the
Activating Revenue Report, that are in a form and with content
acceptable to the Management Trustee and plaintiff. If these reports
cannot be produced for each of the sixteen (16) divestiture markets,
these reports should cover the smallest geographic area that includes
the divestiture markets as is technically feasible. If the Transaction
has not closed within seven (7) days after the filing of the Complaint,
on that day defendants will submit to plaintiff and the Management
Trustee current copies of these reports.
H. Defendants shall take no action that would jeopardize, delay, or
impede the sale of the Divestiture Assets nor shall defendants take any
action that would interfere with the ability of any Divestiture Trustee
appointed pursuant to the proposed Final Judgment to operate and manage
the Divestiture Assets or to complete the divestitures pursuant to the
proposed Final Judgment to an Acquirer(s) acceptable to plaintiff.
I. Within seven (7) days of the filing of the Complaint or prior to
the closing of the Transaction, whichever is sooner, defendants shall
appoint (and notify plaintiff and the Management Trustee of their names
and titles) sufficient employees for each of the Wireless Business
Divestiture Assets and the Cellular One Group Assets, who are familiar
with and have had responsibility for the management, operation,
marketing, and sales of the Divestiture Assets, to assist the
Management Trustee with his duties and responsibilities hereunder.
J. Except for employees (1) whose primary employment
responsibilities relate to the Divestiture Assets, or (2) who are
involved in providing support services to the Divestiture Assets
pursuant to Sections V and VI of this Stipulation and Section V of the
proposed Final Judgment, defendants shall not permit any other of their
employees, officers, or directors to be involved in the operations of
the Divestiture Assets.
K. Except as required by law in the course of (1) complying with
this Stipulation and the proposed Final Judgment; (2) overseeing
compliance with policies and standards concerning the safety, health,
and environmental aspects of the operations of the Divestiture Assets
and the integrity of their financial controls; (3) defending legal
claims, investigations or enforcement actions threatened or brought
against the Divestiture Assets; or (4) obtaining legal advice,
defendants' employees (excluding employees (a) whose primary employment
responsibilities relate to the Divestiture Assets, or (b) who are
involved in providing support services to the Divestiture Assets
pursuant to Sections V and VI of this Stipulation and Section V of the
proposed Final Judgment) shall not receive, or have access to, or use
any material confidential information, not in the public domain, of the
Divestiture Assets. Defendants may receive aggregate financial
information relating to the Divestiture Assets to the extent necessary
to allow defendants to prepare the defendants' consolidated financial
reports, tax returns, reports
[[Page 44376]]
required by securities laws, and personnel reports. Any such
information that is obtained pursuant to this subparagraph shall be
used only for the purposes set forth in this subparagraph.
L. Defendants may offer a bonus or severance to employees whose
primary employment responsibilities relate to the Divestiture Assets,
that continue their employment until divestiture (in addition to any
other bonus or severance to which the employees would otherwise be
entitled).
M. Until the Divestiture Assets are divested to an Acquirer(s)
acceptable to plaintiff, defendants shall provide to the Divestiture
Assets, at no cost, support services needed to maintain the Divestiture
Assets in the ordinary course of business, including but not limited
to:
(1) Federal and state regulatory policy development and compliance;
(2) Human resources administrative services;
(3) Environmental, health and safety services, and developing
corporate policies and insuring compliance with federal and state
regulations and corporate policies;
(4) Preparation of tax returns;
(5) Financial accounting and reporting services;
(6) Audit services;
(7) Legal services;
(8) Routine network maintenance, repair, improvements, and
upgrades;
(9) Switching, call completion, and other services necessary to
allow subscribers to use mobile wireless services and complete calls;
(10) Billing, customer care and customer service related functions
necessary to maintain the subscriber account and relationship;
(11) For each retail and indirect sales outlet, a sixty (60) day
supply of inventory, including both handsets and accessories, branded
as directed by the Management Trustee, based on each outlet's average
sales for the prior two (2) months, and if the Management Trustee
requests, ALLTEL shall make available in sufficient quantities, branded
as directed by the Management Trustee, handsets and accessories,
introduced by ALLTEL in similar markets that are compatible with the
network in the sixteen (16) Divestiture Markets;
(12) The individual financial reports described in seciton VI.F
shall be provided on a monthly basis; and
(13) The sales reports described in Section VI.G shall be provided
on a daily basis.
N. Prior to the closing of the Transaction, defendants will notify
plaintiff in writing of the steps defendants have taken to comply with
this Section. If the Transaction has not closed within seven (7) days
after the filing of the Complaint, on that day defendants will submit
to plaintiff and the Management Trustee a detailed statement of how
defendants will comply with Section VI.A prior to the closing of the
Transaction, including but not limited to: (1) Marketing plans for the
sale of mobile wireless telecommunications services by the mobile
wireless business to be divested, including customer retention plans
and promotions; (2) the designation of a management team who will have
responsibility for and manage the Divestiture Assets prior to the
closing of the Transaction, identifying any changes from pre-filing
staffing; (3) plans for retention of employees and payment of retention
bonuses to employees whose primary duties related to the mobile
wireless business to be divested; and (4) plans for network
maintenance, repair improvements, and upgrades of the Wireless
Divestiture Assets.
O. This Preservation of Assets Stipulation and Order shall remain
in effect until consummation of the divestitures required by the
proposed Final Judgment or until further order of the Court.
Dated: July 6, 2005.
Respectively submitted.
For Plaintiff United States
Deborah A. Roy (D.C. Bar 452573),
Laura R. Starling,
Hillary B. Burchuk (D.C. Bar 366755),
Matthew C. Hammond,
Attorneys, Telecommunications & Media Enforcement Section, Antitrust
Division.
U.S. Department of Justice, City Center Building, 1401 H Street,
NW., Suite 8000, Washington, DC 20530, (202) 514-5621, Facsimile
(202) 514-6381.
For Defendant ALLTEL Corporation
Michael L. Weiner,
Brian C. Mohr (D.C. Bar 385983),
Skadden, Arps, State, Meagher & Florn LLP, Four Times Square, New
York, New York 10036-6522, (212) 735-2632.
For Defendant Western Wireless Corporation
Ilene Knable Gotts (D.C. Bar 384740),
Wachtell, Lipton, Rosen & Katz, 51 W. 52nd Street, New York, NY
10019, (212) 403-1247.
Order
It is so ordered by the Court, this--day of--, 2005.
United States District Judge.
[FR Doc. 05-15020 Filed 5-8-05; 8:45 am]
BILLING CODE 4410-11-M