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Softbank yields to US security concerns on Sprint

Softbank yields to US security concerns on Sprint

Amid a heated takeover battle for US wireless carrier Sprint, Japan’s Softbank has taken unusual steps to allay national security concerns about the deal, but a rival bid claims this is insufficient.

Documents filed by the Japanese mobile operator this month show it would create a security director on the Sprint board “subject to US government approval,” who would manage any issues related to Washington’s security concerns.

Softbank has previously pledged to US lawmakers to avoid using network equipment from Chinese-based Huawei, which has come under scrutiny in Congress, with one report calling the firm a security threat.

The Wall Street Journal reported Wednesday the US government is also seeking the right to approve some of Sprint’s equipment purchases and wants the removal of Chinese gear from a Sprint affiliate’s network.

The US Department of Justice in January urged regulators to delay the $20 billion takeover until the national security ramifications are evaluated.

Since then, a rival bid worth $25.5 billion for Sprint has emerged from satellite communications firm Dish Networks. And on Wednesday, Dish said the tie-up with Softbank still would pose national security risks.

Stanton Dodge, Dish executive vice president and general counsel, said the reports “confirm the serious national security risks of Softbank acquiring Sprint and its wireless and wireline assets of national strategic importance.”

Dodge added, “We remain concerned, however, that these reported steps do not adequately protect our national security interests, especially with respect to Sprint’s critical fiber backbone network and Sprint’s extensive contracts to provide important telecommunications services for government, law enforcement and defense customers.”

Any major foreign takeover of a US firm may be reviewed by the secretive Committee on Foreign Investment in the United States (CFIUS), an intergovernmental panel headed by the US Treasury which also includes the Departments of Homeland Security and Defense.

Softbank and Sprint are seeking to resolve the security issues ahead of a Sprint shareholder vote on the takeover set for next month. A Sprint spokesman in the US declined comment on the security issues, as did a Softbank spokesman in Japan.

Softbank agreed in October to pay $20 billion for a 70 percent stake in US-based Sprint in the biggest overseas acquisition by a Japanese firm.

The tie-up was expected to provide Sprint with capital that the company needs to compete better with its larger rivals, analysts said.

Sprint has around 55 million US customers, roughly half the size of Verizon and AT&T.

Dish has made the counter-bid for Sprint, saying it wants to create a unique company that could deliver a fully integrated, nationwide bundle of video, television, broadband Internet and voice services.

Sprint and Dish are also battling for control of Clearwire, a broadband service firm in which Sprint holds a 50 percent stake.

Sprint said Tuesday it was hiking its offer for the remaining shares of Clearwire, valuing Clearwire at $10.7 billion, topping the Dish offer.

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