Published May 23, 2013
In an unusual concession that highlights security jitters about China, the U.S. government will be allowed to approve a “security” director at Sprint (S) if the wireless provider’s $20.1 billion deal with Japan’s SoftBank is consummated.
The revelation follows reports earlier this year indicating the U.S. is seeking oversight of network-equipment purchases by Sprint amid concerns that Chinese suppliers such as Huawei Technologies and rival ZTE pose national-security risks by giving Beijing an avenue to spy on American citizens.
According to a Securities and Exchange Commission filing dated May 1, Sprint said “it is anticipated that all times one of the directors designated by SoftBank, subject to U.S. government approval, will serve as the ‘security director.’”
The director would be one of 10 and focused on network security matters, an area of concern for the U.S. government.
Foreign transactions are subject to approval by the Committee on Foreign Investments in the United States, or CFIUS, which is an inter-agency panel charged with ensuring national-security and critical infrastructure assets don’t fall into the wrong hands.
Additionally, the U.S. is seeking the right to approve some of Sprint’s equipment purchases and wants the removal of Chinese gear from Clearwire (CLWR), an affiliate Sprint is on the verge of acquiring that uses some Huawei radio base stations, The Wall Street Journal reported.
That move could cost Tokyo-based SoftBank about $1 billion, the paper reported.
Sprint declined to comment on the news.
The developments could help the case being made by Dish Network (DISH), which last month unveiled a $25.5 billion offer to acquire all of Sprint in an effort to thwart the SoftBank deal.
In a statement, Dish said the “extraordinary board structure” and $1 billion in additional costs “confirm the serious national security risks of SoftBank acquiring Sprint and its wireless and wireline assets of national security importance.”
Stanton Dodge, Dish’s general counsel, said the company remains “concerned” that these steps “do not adequately protect our national security interests,” highlighting Sprint’s “critical fiber backbone network” and its “extensive contracts to provide important telecommunications services for government, law enforcement and defense customers.”
Shares of Overland Park, Kan.-based Sprint dipped 0.41% to $7.27 in premarket trading on Thursday.