Dish: SoftBank Deal A Security Risk

Japanese telecommunications company SoftBank has almost overcome the biggest hurdle in its $20.1 billion bid for Sprint Nextel Corp. (NYSE:S), as the Committee on Foreign Investment in the United States has signed off on the deal after both companies made concessions to insure national security.

SoftBank has tentatively received national security approval through a number of concessions made by both SoftBank and Sprint, including an agreement to allow the government to install a director on Sprint’s board. The government-appointed director will be in charge of making sure the company complies with rules regarding national security.

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The SoftBank buyout came under scrutiny when it was revealed that SoftBank uses equipment manufactured by Huawei and ZTE, two Chinese companies that are thought to have close ties with the Chinese government. SoftBank uses equipment from those Chinese manufacturers outside the U.S., and has promised not to use said equipment in the States if the Sprint deal goes through. Wrapped up in the SoftBank-Sprint deal is American wireless network operator Clearwire (NASDAQ:CLWR), a company Sprint has been looking to purchase. Clearwire also uses some Huawei products in parts of its network.

Dish Network (NASDAQ:DISH), which has submitted a rival bid for Sprint, has put out an ad campaign designed to raise fear about the possibility of foreign takeover by SoftBank. Dish has bid $25.5 billion for Sprint and the company believes a foreign takeover of the wireless giant would leave the U.S. at risk for overseas cyberattacks. Dish has not made a similar promise to avoid products produced by Huawei and other Chinese manufacturers.

SoftBank and Sprint have been in close contact with the U.S. government in regards to the deal. They have agreed to remove Huawei technology from Clearwire networks, a task that will cost about $1 billion. In addition to the removal of Huawei technology and the placement of a government official on Sprint’s board, SoftBank has agreed to give the government a say in which non-American vendors can be used by Sprint.

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Despite Dish’s claims that, “We believe the U.S. government should 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,” it appears as though SoftBank and Sprint are fully cooperating with the U.S. government and will continue to move forward with the deal.

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