DoJ steps in on AT&T and Liberty's $1.95B Puerto Rico deal but both companies expect it to close on Oct. 31

Puerto Rico
Liberty Latin America agrees to sell of some its fiber assets in Puerto Rico to WorldNet as part of its $1.95 billion deal with AT&T. (Getty Images)

On Friday, the Department of Justice (DoJ) stepped in on AT&T's deal to sell its operations in Puerto Rico to Liberty Communications for $1.95 billion.

The DoJ said it was requiring AT&T and Liberty Communications to offload certain assets to Puerto Rico-based WorldNet in order for Liberty to continue with its acquisition of AT&T's assets in both Puerto Rico and the U.S. Virgin Islands. Liberty Communications is a subsidiary of Liberty Latin America.

Also on Friday, Liberty Latin America said it had entered into a consent agreement with the DoJ to sell-off some its B2B operations that are part of its operations in Puerto Rico to WorldNet in order to alleviate the DoJ's concerns.

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Liberty Latin America expects a preliminary court order in the next few days permitting it to close on its transaction with AT&T by the end of this month. A spokesperson for AT&T also said the telco expects the deal to close on Oct. 31. AT&T first proposed the sell off of most its wireline and wireless assets to Liberty Communications over a year ago.

RELATED: AT&T sells its Puerto Rico and U.S. Virgin Islands operations for $1.95B

The DoJ complaint on Friday said Liberty and AT&T are two of the three largest wireline providers in Puerto Rico, and own two of three largest fiber-based networks on the island. The complaint said competition between Liberty and AT&T has led to lower prices and higher quality services for customers.

According to the complaint, the "combination of Liberty and AT&T would leave many customers with only one alternative and others with no competitive choice at all, likely resulting in increased prices and lower-quality services for enterprise customers across Puerto Rico."

On Friday, the Justice Department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed merger. Also on Friday, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the department’s complaint.

The DoJ approved WorldNet as the acquirer of Liberty's fiber-based Columbus network in the metro San Juan area that Liberty bought as part of its purchase of Cable & Wireless four years ago.

WorldNet also gained other assets as part of the DoJ's requirement, including fiber facilities and indefeasible rights of rights of use across Puerto Rico. It will take over retail fiber-based enterprise customer accounts served by Liberty today, with some exceptions, and it will have the right to pull fiber through Liberty’s conduit and attach fiber Liberty’s telephone poles.

Lastly, WorldNet also has an option to buy segments of AT&T's aerial fiber-based core network. AT&T didn't comment on the possible sale of those assets.

“The merger, as originally structured, would have eliminated competition for critical fiber-optic-based telecommunications services that businesses in Puerto Rico rely on every day,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division, in a statement on Friday.  “Today’s settlement will ensure that businesses throughout Puerto Rico continue to benefit from vigorous competition in the provision of these services.”

AT&T has been reducing its debt load, thanks in part to pressure from Elliot Management, and building up a war chest for upcoming spectrum auctions.

With the Liberty deal, AT&T is keeping its FirstNet responsibilities and relationships, including its FirstNet network core and service capabilities, as well as DirecTV and certain global business customer relationships. After the deal closes, Liberty Latin America will support AT&T’s FirstNet build in Puerto Rico and the U.S. Virgin Islands.

The deal also includes leases and real estate assets and 1.1 million mobile subscribers and contracts, with around 1,300 AT&T employees moving over to Liberty.

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