Sprint-SoftBank Merger Approval by CFIUS Poses New Obstacle to Dish Bid
NEWS ANALYSIS: A government regulatory committee's decision to approve of the Sprint–SoftBank merger makes it harder for Dish Network to derail the deal.Dish Networks is going to have some tough sledding in its efforts to squelch the planned acquisition by SoftBank of 70 percent of Sprint. Sprint and SoftBank announced on May 29 in an 8-K filing with the U.S. Securities and Exchange Commission that their merger had received approval from the Committee on Foreign Investment in the United States (CFIUS). The next and essentially final step to the merger is Federal Communications Commission approval. The FCC is expected to begin its consideration of Sprint's application soon. In its filing, Sprint revealed details of its National Security Agreement with the U.S. government. That agreement means that Sprint will appoint a security director to its board. The security director will ensure that the requirements of the U.S. government are met. In addition, the agreement includes a provision that Sprint will remove and decommission equipment on the Clearwire network once Sprint's acquisition of Clearwire is complete and the agreement provides that Sprint will get U.S. approval of network equipment vendors. The requirement to remove equipment from specific vendors and to get approval for network equipment purchases is unusual but not unprecedented. Similar requirements have been placed on other companies where the U.S. government has determined that a security risk exists.
Currently, Congress and officials in the Department of Homeland Security and the Department of Defense have expressed concern over reported intelligence risks associated with Huawei and ZTE telecom equipment. Clearwire's management, meanwhile, is fighting its own merger battles, including claims that the merger with Sprint isn't a good deal for stockholders.