- The Washington Times - Wednesday, May 29, 2013

SoftBank is closer to finalizing a $20.1 billion merger with Sprint that would give the Japanese telecom company a 70 percent ownership stake in the U.S.’s third-largest carrier.

Sprint Nextel Corp. announced Wednesday that the Committee on Foreign Investment in the U.S. (CFIUS), a federal panel that reviews transactions involving foreign ownership of American businesses, found no threat to national security in the proposed deal.

The merger has two more hurdles to clear: a Federal Communications Commission review on whether the transaction is in the public interest, and a June 12 Sprint shareholder vote. Sprint’s board of directors is advising stockholders to vote for the transaction.

A SoftBank Corp. spokesman cited their commitment to U.S. national security interests and said they were “pleased” by the CFIUS decision.

“We look forward to closing our transaction with Sprint in early July and to bringing the benefits of a more competitive wireless market to U.S. customers,” the spokesperson said.

As a precondition of CFIUS clearance, Sprint and SoftBank entered into a National Security Agreement with the Department of Justice, Department of Defense and the Department of Homeland Security, giving the U.S. government power to approve a “security director” to serve on the new Sprint board of directors. The security director will serve as a contact between Sprint and the U.S. government on security-related matters.

CFIUS’ decision in favor of the deal is a blow to Dish Network Corp., which last month made an unsolicited $25.5 billion bid for full ownership of Sprint.

Last week, Dish created a website (nationalsecuritymatters.com) and ran ads in Washington-area newspapers to point out a possible national security risk due to SoftBank’s ties with Chinese manufacturer Huawei Technologies, the world’s second-largest telecom equipment provider.

SoftBank has agreed to not use Huawei equipment in Sprint’s network and to replace Huawei products in Clearwire, a wireless service provider that Sprint is trying to acquire.

But lawmakers continue to be wary of Huawei’s potential ties to the Chinese government — even though an 18-month White House-ordered review cleared Huawei Technologies Co. of espionage last year, according to Reuters.

Dish likened the Sprint-SoftBank deal to the 2006 Dubai controversy when a state-owned company was set to run six key American ports, prompting U.S. politicians to argue that the deal would compromise U.S. port security. The Dubai company later dropped the deal under bipartisan pressure from Congress.

Fear of cybersecurity breaches has increased in recent months. The Pentagon accused the Chinese government and military last month of hacking into U.S. government databases, an accusation China dismissed as “groundless.”

Other U.S. telecom companies already have heavy foreign investment. Britain’s Vodafone owns 45 percent of Verizon Wireless while Germany’ Deutsche Telekom owns 100 percent of T-Mobile. In 2000, Japanese company NTT DoCoMo invested $9.8 billion in AT&T Wireless.

Sprint and SoftBank expect to finalize the deal by July. The merger will give Sprint the cash to compete with AT&T and Verizon and give the Japanese company a foothold in the U.S. market.