Softbank Makes Concessions to Feds, to Grease Sprint Deal: Report

Softbank, needing to win government approval of its bid for Sprint, has offered influence over its board and to remove Huawei equipment.

As Sprint and Softbank, Japan's third-largest wireless carrier, move toward the completion of a merger first announced in October 2012, Softbank has said it will make certain concessions to help win U.S. regulators' approval of the deal.

Softbank has said it will allow the federal government to approve one of the directors it names to the Sprint board, the Wall Street Journal reported May 22. That person will be responsible for overseeing national security issues and will also be a member of the Sprint board's compensation committee, said the Journal.

The deal between the carriers includes Softbank acquiring a 70 percent stake in Sprint in exchange for $20.1 billion. That a non-U.S. entity would have control of such critical U.S. infrastructure gives many pause, in regard to security. At the outset of the deal, AT&T Vice President Brad Burns expressed concern about a foreign company having "control of significantly more U.S. wireless spectrum than any other company."

To further ease such concerns, Softbank CEO Masayoshi Son has also said that Softbank will remove any equipment from Huawei, a Chinese company that the U.S. government has called a potential security threat. A U.S. House Intelligence Committee last year cautioned U.S. companies working in areas involved in critical infrastructure, such as railways and utilities, against using equipment from Huawei or ZTE, another Chinese manufacturer of telecom equipment.

Sprint is in the process of acquiring 4G provider Clearwire—a process that took a step forward May 22, when Clearwire announced that it had accepted an increased bid from Sprint—and the Clearwire network includes Huawei equipment, though not within its core infrastructure. Removing the Huawei equipment from the complete Sprint network will cost Softbank approximately $1 billion, said the Journal, citing sources close to the matter.

As Sprint and Softbank continue to work through the details of their deal, Sprint is still considering an April offer made by U.S. satellite television provider Dish Network. Dish has offered Sprint $25.5 billion and an opportunity to bundle the perks of cable companies with the perks of wireless carriers—an industry first.

Softbank's Son has called that deal "incomplete and illusory," arguing that Softbank's offer actually is a 21 percent fiscally superior deal and that it brings expertise and scale that Dish can't begin to match.

"They have no understanding whatsoever about the details, the real situation of Sprint," Son said during an April 30 presentation. "Softbank is growing the quickest in the world, in profit, gross—quickest in the world, in terms of many measurements. Dish has zero expertise in our mobile industry."

Tom Cullen, Dish executive vice president of corporate development, during an April 15 conference call with analysts to elaborate on Dish's bid for Sprint, pointed out that the benefit of Sprint choosing Dish over Softbank would be a quicker federal approval process.

"We certainly have an advantage on the Justice Department side because we don't go through the foreign ownership safety review," said Cullen.

According to the Journal, the Softbank deal will be reviewed by representatives from the departments of Justice, Defense and Homeland Security, as well as the FBI and the Committee on Foreign Investment in the U.S., a panel headed by the Treasury.