SoftBank/Sprint Deal Clears CFIUS Review

Government will get opportunity to decommission some Clearwire equipment

John Eggerton -- Broadcasting & Cable, 5/29/2013 9:45:03 AM

According to Sprint and SoftBank, their deal has received clearance from CFIUS (the Committee on Foreign Investment in the United States).

In a filing with the Securities & Exchange Commission, the companies said there are no more unresolved national security issues related to the proposed purchase of Sprint by Japanese company SoftBank.

That review also included the sale of spectrum from Clearwire, whose purchase by Sprint from a consortium of cable operators and Google the FCC approved back in December. SoftBank is seeking a waiver of the FCC's 25% cap on foreign ownership to be able to own Clearwire.

But the CFIUS approval comes with a few conditions.

Softbank and Sprint have entered into a national security agreements with the NSA, DOD and DHS and must appoint a government-approved independent member of the board to serve as security director and oversee the agreement.

The government also has a one-time right to require Sprint to decommission certain equipment in the Clearwire network assuming it completes that purchase and an ongoing right to review and approve certain network vendors for Sprint and Clearwire.

Some national security concerns have been raised about the deal in the FCC docket.

In its comments, the Communications Workers of America said they were concerned about the connections of SoftBank and Clearwire's association with Chinese vendors Huawei and ZTE, which are supplying equipment for their networks. At minimum, CWA wants restrictions on the use of Huawei and ZTE technology in Sprint/Clearwire networks, which it concedes would have the possible side benefit of boosting jobs in domestic equipment companies.

Back in October and following an almost year-long investigation, the House Permanent Select Committee on Intelligence recommended that telecom providers steer clear of Chinese-based global tech companies Huawei and ZTE.

During congressional debates over cybersecurity, one issue both sides of the aisle agreed on was that the country needed to better track the foreign-made telecom-related hardware and software in critical U.S. telecom systems.

If the FCC and DOJ do sign off on the SoftBank/Sprint deal, it will likely be with conditions agreed to by the companies to insulate the U.S. operations from ZTE or Huawei network equipment.

The FCC Wednesday was on day 180 of its review of the Sprint/SoftBank/Clearwire deal. It sets itself a 180-day informal shot clock for merger reviews.