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Softbank takeover of Sprint wins U.S. security clearance

AFP-JIJI

U.S. national security officials have approved Softbank’s planned $20 billion takeover of Sprint, the third-largest U.S. mobile carrier, the companies said Wednesday.

The Committee on Foreign Investment in the U.S. (CFIUS) completed the investigation with “no unresolved national security issues relating to the transaction,” the companies said in a statement.

The deal still awaits Sprint Nextel Corp. shareholders’ approval and clearance from the U.S. Federal Communications Commission. The Sprint vote is set for June 12.

Under the agreement with the CFIUS, the companies must appoint an independent member to the Sprint board of directors to serve as security director, according to a Sprint filing with the U.S. Securities and Exchange Commission.

The security director, who must be approved by U.S. authorities, will oversee national security matters and serve as a point of contact for U.S. agencies on security matters, the SEC filing said.

The agreement also requires that U.S. agencies will have a one-time authority to demand Sprint remove and decommission equipment as part of Sprint’s proposed takeover of the broadband firm Clearwire, a transaction separate from the Softbank-Sprint deal, the filing said.

Clearwire owns some Chinese-made telecommunications equipment in the U.S. that has been seen by U.S. lawmakers as a national security risk.

U.S. lawmakers have previously indicated Softbank agreed to remove any network equipment from Chinese giant Huawei due to national security concerns.

Responding to the prospect of being excluded, Huawei’s U.S. vice president, William Plummer, said the company is facing “political protectionism.”

“The proposals such as the one being made in the Sprint-Softbank case are ineffective remedies,” Plummer said.

He said that because all major vendors rely on the same supply chain, if Huawei is replaced, “you do not change the security assurance one bit.”

“What’s happened here is a very inappropriate politicization of the commercial environment, and it’s not solving the purported problem.”

Softbank agreed in October to pay $20 billion for a 70 percent stake in Sprint.

The U.S. Department of Justice in January urged regulators to delay the proposed takeover until the national security ramifications could be evaluated.

Since then, a rival bid worth $25.5 billion for Sprint emerged from satellite communications firm Dish Networks. Last week, Dish claimed the tieup with Softbank would pose national security risks.

An October 2012 House Intelligence Committee report concluded that the risks associated with U.S. infrastructure made by Chinese telecom companies Huawei and ZTE “could undermine core U.S. national security interests.” The report said Clearwire is a Huawei customer in the U.S.

Sprint’s board of directors has endorsed the Softbank takeover bid. A special committee of the Sprint board is currently in discussions with Dish regarding the April 15 Dish bid for Sprint.

Softbank Chief Executive Masayoshi Son said last month the Softbank offer is superior to the Dish proposal in part because the deal could close a year earlier than the Dish bid. The joint Softbank-Sprint statement Wednesday said the merger could close as soon as this July.

The tieup is expected to provide Sprint with capital that the company needs to compete better with its larger rivals. Sprint has around 55 million U.S. customers, roughly half the size of Verizon and AT&T.

Dish has said it wants Sprint to create a unique company that could deliver a fully integrated, nationwide bundle of video, television, broadband Internet and voice services.

Dish said in a statement that “we believe the U.S. government should continue to proceed with deliberation and caution in turning over assets of national strategic importance — such as the Sprint fiber backbone and wireless networks — to a foreign-controlled entity with significant ties to China.”