Why is the DOJ Looking Into Sprint?

Most of the objections over Softbank’s (SFTBF.PK) proposed takeover of Sprint (NYSE:S), the United States’ third largest mobile carrier, have cited the deal’s potential to limit competition as a reason to be concerned. But the Department of Justice had other motives when it asked the U.S. Federal Communications Commission for more time to investigate the ramifications that the Japanese company’s acquisition will have on national security.

In a letter submitted to the FCC on Tuesday, the department’s attorney adviser for National Security Division, Jennifer Rockoff, asked the agency to refrain from making any decisions until its review was complete.

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“DOJ, [Department of Homeland Security], and FBI (“the Agencies”) are currently reviewing this matter for any national security, law enforcement, and public safety issues but have not yet completed that effort. We therefore request that the Commission defer action until such time as the Agencies notify the Commission of the completion of their review and, based on the results of such review, request appropriate action by the Commission,” read the filing…
Competition concerns clearly did not prompt the Justice Department to write this letter, based on the fact that the Department of Homeland Security, not the DOJ’s antitrust unit, was named in the document. The deal has drawn concerns because Softbank, a foreign-owned company, will take control of a 70 percent stake in Sprint if the deal is approved. However, Sprint is not worried that the Justice Department will block the takeover. “This is a routine request when working with the [Committee on Foreign Investment in the United States] agencies regarding national security,” Sprint spokesman John Taylor said in an email to Gigaom.

However, competition was the exact reason Dish Network (NASDAQ:DISH) submitted a filing with the FCC earlier this month. The pay-television provider asked the agency to pause its consideration of the Softbank deal on January 16 because it believed that the “commission need[ed] to properly review the transaction’s effects on competition,” particularly the effect of the Sprint-Clearwire spectrum aggregation. Dish argued that the industry would be better served if a part of the spectrum was sold to a new entrant, like itself, rather than an incumbent, like Sprint. The filing noted that Dish’s “offer contemplates precisely such an outcome.” Dish Network announced a $2.28 billion bid for Clearwire (NASDAQ:CLWR) in early January, which was well in-line with its efforts to create a wireless network of its own.

However, while Dish is in “continued negotiations” to acquire Clearwire, the company filed a letter with the FCC on Tuesday announcing that it decided not to file a petition opposing Softbank’s acquisition of Sprint.

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