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This year’s mergers-and-acquisitions boom is re-shaping industries and contributing handsomely to the bottom lines of leading investment banks.  One statutory provision triggered in many transactions—not just those involving major wireless or satellite broadcasting companies—is Section 310(d) of the Communications Act of 1934, as amended. This provision requires that the FCC grant its prior consent to the assignment of radio station licenses or the transfer of control of a radio station licensee.

Radio licenses issued by the FCC are essential assets of commercial wireless carriers such as Verizon or AT&T, TV and radio broadcast licensees, and satellite broadcasting companies.  These are among the prized assets in transactions involving these companies. Section 310(d) is the principal lever available to the FCC and interested parties for assessing whether major transactions involving communications and media companies are in the public interest.

Section 310(d) is sometimes overlooked in transactions involving entities that are not telecommunications companies, but have obtained FCC licenses to operate mobile, fixed or satellite radio systems to support the target company’s internal wireless voice and data communications requirements.

These are often referred to as “private wireless systems” and are widely deployed by operators of oil and gas pipelines, refineries, exploration and production fields; electric distribution and transmission networks and power generation facilities; chemical plants; and railroads. Large retailers, some logistics companies, and many manufacturing companies also operate private wireless systems.

Investments in private wireless systems by a critical infrastructure company are often measured in millions of dollars.  Apart from the technology, these licenses are valuable in and of themselves because in many areas of the country the spectrum allocated for private wireless systems is exhausted or the company paid several million dollars to obtain area-wide licenses at an FCC auction or acquired the spectrum from auction winners—consistent with the FCC’s secondary markets rule.

Assignment and transfer of control applications pertaining to private wireless systems do not raise major public policy or competitiveness issues and almost always are reviewed and acted upon by the FCC’s Wireless Telecommunications Bureau or the Satellite Division of the International Bureau.  Timeliness is essential to avoid the possibility of an enforcement action as the FCC’s consent must be obtained prior to closing.

Generally, these applications should be filed no later than 60 days prior to the anticipated closing date.  The principal due diligence task is developing the inventory of the target company’s FCC licenses and confirming the licenses are in good order, as discussed below.

In reviewing applications for transfers of control or the assignment of licenses, the FCC focuses on whether the licenses subject to the transaction are in effect (not expired) and are “constructed,” or, as applicable, the geographic coverage requirement has been met;  the assignee or transferee (or an affiliate of the assignee or transferee) meets the FCC’s “eligibility requirements” for each license; direct and indirect foreign ownership questions regarding the assignee/transferee are addressed;  the required certifications are made, including whether the transferee or the assignee, or any controlling entity, has been convicted of a felony in state or federal court; and whether  the applicants are delinquent in fees owed the FCC.  In certain instances, the FCC license-holding entities of the acquiring company must be disclosed.