Sprint, SoftBank receive U.S. security clearance
Sprint Nextel and SoftBank said Wednesday that they received U.S. national security clearance to proceed with their proposal to merge, clearing a hurdle in the Japanese carrier’s ambition to enter the lucrative U.S. wireless market but agreeing to mitigating steps to assuage critics.
The Committee on Foreign Investment in the United States, a U.S. Treasury Department agency authorized to review transactions involving a foreign person or company, has completed its investigation and concluded that “there are no unresolved national security issues relating to the transaction,” Sprint announced Wednesday.
The deal still requires clearance from the Federal Communications Commission and Sprint’s shareholders.
“When you look at possibly major barriers for this (deal), this was probably the biggest single one,” says Michael Davies, chairman of Endeavour Partners, a mobile telecom consulting company, adding the completion of the merger is “much more likely” now.
In October, Japan’s SoftBank entered a deal to buy 70% of Sprint for $20 billion. But the deal has renewed concern from critics that foreign control of U.S. wireless networks could compromise national security. As part of the deal, SoftBank agreed to refrain from buying equipment from China’s Huawei, a supplier which allegedly has ties to the Chinese military.
Dish Network, which has submitted its own proposal to buy all of Sprint for $25.5 billion, has openly criticized the deal and created a media campaign and its own website to address security concerns.
As part of the review, Sprint and SoftBank have entered into a national security agreement with the U.S. government. Other U.S. agencies that oversee telecom issues – the Department of Justice, including the Federal Bureau of Investigation, and the Department of Homeland Security – will notify the FCC that they have completed their review for national security, law enforcement and public safety concerns.
Once the FCC receives the notice from the agencies, it can proceed with its public interest review of the transaction.
As part of the national security review, Sprint and SoftBank agreed to appoint an independent member to the new Sprint board of directors to serve as the security director, whose appointment must be approved by U.S. regulators.
U.S. regulators also will have the right to review and approve certain network equipment vendors and services providers of Sprint.
Sprint currently owns about half of another wireless carrier, Clearwire, and plans to buy more shares to gain control. Once the acquisition is completed, U.S. regulators also get one-time right to require Sprint to remove certain equipment deployed in the Clearwire network by the end of 2016.
Sprint and SoftBank have “gone a little bit further than they might have had to” in agreeing to the concessions, Davies says. But they will help quiet down politically driven “fear mongering” from the deal’s opponents, he says. “Some of the fears are overstated.”
The concessions also will ease the review process undertaken by the FCC, which is considering the merger’s impact on consumers and competition, Davies says.
“It’s a prudent thing to do for any deal such as this,” he says.
Sprint and SoftBank said they anticipate the merger will be completed in July but a special committee of Sprint’s board of directors is currently discussing and negotiating with Dish Network regarding its proposal.
Retrieved from USA Today