NEWSReport No. 95- INTERNATIONAL ACTION December 15, 1995 FCC APPROVES SPRINT ALLIANCE WITH FRANCE TELE COM AND DEUTSCHE TELEKOM SUBJECT TO STRICT CONDITIONS The Commission today cleared the way for Sprint's global alliance with France Telecom (FT) and Deutsche Telekom (DT) to ensure U.S. consumers enjoy expanded service offerings and lower prices. The FCC's approval, however, is subject to strict conditions to protect the U.S. telecommunications market against anticompetitive abuse of FT's and DT's monopoly power in France and Germany. The Commission applied its new rules on foreign carrier entry, and found that neither France nor Germany presently afford U.S. carriers effective competitive opportunities. The Commission nonetheless found two significant countervailing public interest factors: (1) the planned liberalization of the French and German telecommunications markets; and (2) the competitive benefits of the investments by FT and DT of up to $4.2 billion in Sprint for U.S. telecommunications markets. A critical component of the Commission's decision to grant Sprint's petition was its conclusion that the French and German Governments are committed to full competition in their telecommunications markets, which will be available to U.S. participants. In the past year, both the French and German Governments have announced and begun to implement wide-ranging liberalization plans. Senior French and German Government officials have committed, by letters to the Commission, to liberalize the provision of alternative infrastructure to offer already liberalized services by July 1996, and to fully open their telecommunications services and infrastructure markets by January 1, 1998. The Commission also found that the FT and DT investments of up to $4.2 billion will enable Sprint to expand and upgrade its existing network and to develop new applications and services for its domestic and international operations. The capital will, in addition, enable Sprint to participate fully in its broadband Personal Communications Services venture, WirelessCo, and in Phoenix, its global seamless services joint venture with FT and DT. Sprint's enhanced ability to compete in these areas should lower rates, increase service choices, and encourage more technical innovation, to the benefit of U.S. consumers. The Commission further determined that the terms and conditions of the 10 percent equity investments by FT and DT each in Sprint did not result in a transfer of control of Sprint to FT and DT and, accordingly, no prior FCC approval was required under Section 310(d) of the Act. The Commission, however, imposed strict conditions and requirements to address (1) the incentive and ability for FT and DT to use their current de jure and de facto monopoly market power to engage in anticompetitive conduct arising from their financial interests in Sprint and Phoenix, and (2) the possibility that the telecommunications liberalization to which France and Germany have committed may not be implemented on the anticipated schedule. The Commission concluded that the transaction is consistent with the public interest subject to five conditions and safeguards:  first, Sprint is regulated as a dominant carrier on the France and Germany routes;  second, the Commission will not allow Sprint to operate newly acquired circuits on the U.S.-France and U.S.-Germany routes until alternative infrastructure to provide already-liberalized services and basic switched voice resale competition are available in France and Germany;  third, Sprint is prohibited from accepting special concessions from any foreign carrier, and files certain periodic reports to enable us to monitor compliance with this safeguard;  fourth, Sprint must obtain a written commitment from FT to lower the accounting rate between the United States and France to the same range as the U.S.-U.K. and U.S.- Germany accounting rates in the near future, and in no event later than two years; and  fifth, Sprint must file a report with this Commission no later than March 31, 1998 detailing how France and Germany have implemented effective competitive opportunities and whether the anticipated liberalization has occurred. If it has not, the Commission will take further action, including designating for hearing the issue of whether the public interest continues to be served by Sprint's holding of Section 214 facilities authorizations on the U.S.-France and U.S.-Germany routes. The Commission concluded that this transaction is in the public interest with these conditions and safeguards in place. The conditions and safeguards imposed by the Commission reflect its broad mandate to protect the public interest and welfare of U.S. consumers. With the Commission's finding today, the parties are able to consummate their transaction in mid-January. Sprint, FT and DT announced their global alliance on June 14, 1994, which includes FT and DT each acquiring up to 10 percent of the voting equity in Sprint. The cost of these investments will be based on a complex formula designed to anticipate Sprint's possible divestment of its U.S. cellular operations, and fluctuations in Sprint's public stock price. Under this formula, the investment price could vary from approximately $3.5 to $4.2 billion. The global partnership among Sprint, FT and DT also involves the creation of a joint venture, Phoenix, an alliance to provide enhanced and certain basic telecommunications services to multinational corporate and business customers on a global basis. FT is the 100 percent French Government-owned de jure monopoly service provider in France of local, long distance and international public switched services, and of terrestrial infrastructure for the provision of telecommunications services to the public. DT is the 100 percent German Government-owned de jure monopoly provider of the same types of services and facilities in Germany. Action by the Commission December 15, 1995, by Declaratory Ruling and Order (FCC 95- 498). Chairman and Commissioners. Commissioner Chong approving in part and concurring in part. -FCC- News Media contact: Rosemary Kimball at (202) 418-0500. International Bureau contacts: Diane Cornell at (202) 418-1470 and Kerry E. Murray at (202) 418-1460.