Sprint Asks FCC to Transfer Licenses to Softbank as Part of Merger Plan

By Wayne Rash  |  Posted 2012-11-17

Sprint Asks FCC to Transfer Licenses to Softbank as Part of Merger Plan

Sprint Nextel has requested that the Federal Communications Commission to approve the transfer of its wireless licenses to Softbank, the Japanese wireless giant that’s announced its intentions to buy 70 percent of Sprint in a $20 billion dollar deal.

The transfer of licenses is necessary because Softbank would own controlling interest in Sprint. In addition, Softbank would need FCC approval of the transfer because it’s a foreign corporation that would own more than the normally permitted 25 percent.

In addition, Sprint has asked for transfer of Sprint’s prospective interest in Clearwire’s licenses in advance of the completion of Sprint’s purchase of a controlling interest in Clearwire of more than 50 percent ownership. Effectively, Softbank would control Clearwire because it would own Sprint.

In a public interest statement filed on Nov. 15 with the FCC, Sprint said that the merger and the transfer of licenses would create no competitive harm to the wireless market since Softbank currently has no other interests in the US wireless market.

“It offers the potential to transform the U.S. wireless marketplace by creating a more vibrant rival to compete with today’s two predominant wireless providers, Verizon Wireless and AT&T,” the company said in its statement to the FCC.

In the filing, Sprint revealed that it anticipates an infusion of $8 billion in new capital, which it says it needs to accelerate its broadband deployment. Sprint also said that the merger and resulting license transfer would allow Sprint to offer new forms of competition in terms of new products and services.

Sprint also noted in the filing that the merger is expected to enhance the company’s ability to obtain products, including handsets, and mobile services on more favorable terms because together the companies would have some 92 million subscribers. The filing said that this would put the combined company on the same scale as AT&T and Verizon Wireless in the United States.

In addition to this filing, the Sprint and Softbank have petitioned to allow the foreign ownership of Sprint. “In addition to the transfer of control applications, Sprint and SoftBank have submitted a Petition for Declaratory Ruling to allow SoftBank’s indirect foreign ownership of Sprint to exceed the 25 percent benchmark set forth in Section 310(b)(4) of the Communications Act. As set forth in that petition and in this Public Interest Statement, there are strong public interest benefits to permitting this level of foreign ownership.” Sprint said in its statement.

Besides approval by the FCC for the license transfer, the Softbank merger must be approved by the Committee on Foreign Investment in the U.S. (CFIUS), by the U.S. Department of Justice and the Federal Trade Commission.

Sprint Asks FCC to Transfer Licenses to Softbank as Part of Merger Plan

The two companies must demonstrate that the merger would be in the public interest, which is the basic purpose of the filing.

“Sprint expects its proposed merger with SoftBank to greatly stimulate wireless competition and innovation,” Sprint spokesman John Taylor said in a prepared statement. “The transaction can potentially transform the U.S. wireless marketplace by helping Sprint improve the speed, coverage, reliability, and capabilities of its wireless network and thereby offer consumers more competitive choices in a broadband world.”

Many observers expect the acquisition of 70 percent of Sprint by Softbank to make it through the approval process. To date there’s been little or no opposition to the deal, which is expected to close in the first half of 2013. While the deal will give the perennially troubled Sprint some much needed working capital, it doesn’t really increase the size of the company in the United States.

One thing that the merger will do if it’s approved by the regulatory authorities is to put a significant amount of the U.S. wireless business in foreign hands. Verizon Wireless, for example, is a joint venture between Verizon and global telecom giant Vodafone, which is based in the UK and owns 45 percent of the company. T-Mobile USA is wholly owned by German telecom giant Deutsche Telekom. When the Softbank deal with Sprint closes, it will be 70 percent owned by Softbank, a Japanese telecom giant.

The only major carrier that will remain completely in U.S. hands is AT&T, although Vodafone has periodically suggested that it may sell its part of Verizon Wireless to someone else, most likely Verizon Communications. But that hasn’t happened, and it may never happen, considering that Vodafone is earning nearly half of the $8.5 billion dividend that VZW announced recently.

So does it matter that so much of the wireless business in the U.S. is foreign owned? After all, isn’t this part of the whole globalization thing? It matters in two areas. First, the profits that these companies make from US customers aren’t staying in the US, which isn’t good for the U.S. economy.

Second, it gives foreign companies a great deal of control over telecommunications in the U.S. Right now that’s not a problem, but perhaps it might be depending on the practices of other governments and the state of the economy in those nations. It would be disappointing to see the owners of these wireless companies sink if the economies in their home countries falter, and in the process drag down the U.S. wireless business.

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