Wireless operator Sprint Nextel and Japan’s Softbank have come to an agreement with the Committee on Foreign Investment in the US (CFIUS) that allays national security concerns regarding the Japanese’s US$20.1bn takeover of the carrier.
CFIUS…
Wireless operator Sprint Nextel and Japan’s Softbank have come to an agreement with the Committee on Foreign Investment in the US (CFIUS) that allays national security concerns regarding the Japanese’s US$20.1bn takeover of the carrier.
CFIUS approved the transaction after Sprint and Softbank entered into a “National Security Agreement” with the US government.
Sprint said that it now expects the Department of Justice (DOJ) and the Department of Homeland Security (DOHS) to pass on their approval to the Federal Communications Commission (FCC), which can now complete its review of the deal.
The agreement has three key components, according to an SEC filing.
Firstly Softbank and Sprint are required to recruit an independent director to its board as “Security Director”. That person must be a US citizen, and must be approved by the DOJ, the DOHS, and the Department of Defense (DOD).
Secondly, if Sprint obtains control of Clearwire Corporation or takes it over then the DOJ, the DOHS and the DOD will be able to require Sprint to remove and decommission certain parts in Clearwire’s network by the end of 2016 – that could cost the operator US$1bn according to people familiar with the matter cited by the Wall Street Journal.
Shenzen-based Huawei supplies Softbank in Japan and is one of the largest vendors in the world, but the Chinese manufacturer has been effectively blocked from entering the US market by the legislature.
Softbank had faced tough lobbying from rival bidder Dish Network and incurred the wrath of American politicians who expressed concerns about its use of Chinese equipment in its networks, fearing espionage.
The final key component of the arrangement is that the DOJ, the DOHS and the DOD would have the right to review and approve vendors and managed services providers used by Sprint, and Clearwire should it come under the control of Softbank.
Sprint’s board has recommended Softbank’s bid and its special committee is yet to share its thoughts on Dish’s rival US$25.5bn proposal.
Softbank’s proposed deal still requires approval from the FCC and shareholders. The number three-wireless operator’s investors are set to vote on Softbank’s offer at an EGM on 12 June.
Sprint and Softbank expect the deal to be consummated in July.
Sprint’s co-lead financial advisers are Citigroup, Rothschild and UBS. Its special committee is being advised by BofA Merrill Lynch.
Softbank is being financially advised by The Raine Group, Mizuho and Deutsche Bank.
Dish is being advised by Barclays, Jefferies, Macquarie and Royal Bank of Canada.
