Contortions: SoftBank bends over backwards to please the US government and ease the passage of the acquisition of Sprint Nextel
May 30, 2013
Now that Sprint Nextel has announced that it is to dismantle and throw out the Huawei equipment that it has deployed at the edge of its network and says it won't be buying any more Chinese manufactured kit, the array of skittles that stood in the way of SoftBank of Japan's plans for a US$20.1 billion buyout of 70 per cent of the US carrier are beginning to fall like, well, like ninepins.
The Japanese company has made a series of concessions and quickly reached provisional agreement with the powerful Committee on Foreign Investment in the United States in a deal that should see it sail through the required national security clearance procedure.
The provisional agreement is one in the eye for the top brass at Dish Network, who have their own ambitions to buy Sprint and had argued that they should be the preferred bidder on the grounds that SoftBank is too close to the Chinese manufactuers.
Blogging on "nationalsecuritymatters.com", a website that sounds as though it could well be an organ of the US government but was, in fact, set-up by and is controlled by Dish itself, a marcoms exec wrote, “Without US ownership and control of Sprint, SoftBank’s reliance on Chinese equipment manufacturers raises significant national security concerns."
In another release Dish added, "We believe the US government should proceed with deliberation and caution in turning over assets of national strategic importance - such as the Sprint fibre backbone and wireless networks - to a foreign-controlled entity with significant ties to China.” Dish has also further upped the ante by offering $25.5 billion for SoftBank.
Perhaps the powers that be at Dish should be reminded that the Brits (in the shape of Vodafone) own 45 per cent of Verizon Wireless and the German incumbent carrier Deutsche telekom is the majority shareholder in T-Mobile USA.
Interestingly, Dish, which will not be required to face an investigation by the Committee on Foreign Investment in the United States, has not said that it will ensure that the Huawei equipment already installed at Clearwire, a company Dish is anxious to buy, will be removed.
Amongst the concessions agreed by Sprint and SoftBank are that the US authorities will have a veto over the appointment of any board director having the responsibility for ensuring corporate compliance with US national security concerns. Sprint intends to bring together a board of four individuals to oversee security compliance and membership of that board will have to be approved by the US government. At the same time the authorities will have the power to veto any purchase of equipment.
The next big hurdles that SoftBank will have to overcome include an FCC review of the deal with Sprint and ensuring that shareholders approve the bid. The shareholder vote takes place on June 12 and if it is voted down that will be the end of the matter. However, all the indications seem to be that it will go through.
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