Sprint Nextel Corp and Japan’s Softbank Corp have reached an agreement with US authorities on the national security aspects of the Japanese firm’s pending US$20.1 billion deal to win control of the US wireless carrier, people familiar with the matter said.
As a part of that agreement, the US government will have a veto over new equipment purchases by Sprint in certain circumstances if the two companies merge, one source said.
The government will also establish an oversight committee to make sure the companies abide by their national security promises. A Sprint board member would sit on that committee, said the source, who did not want to be named because the information was not public.
Formal announcement of the highly unusual agreement — drawn up amid fears of Chinese espionage — was expected yesterday in the US, four sources told Reuters.
Japanese mobile operator Softbank agreed to buy a 70 percent stake in Sprint in October last year.
That deal faces a challenge from Dish Network Corp, a US satellite TV provider which last month launched a rival US$25.5 billion bid for Sprint.
No one at Sprint was immediately available to comment, while Softbank declined comment yesterday.
Dish has taken out adverts in Washington newspapers warning that a Softbank-Sprint merger would threaten US national security.
US Senator Charles Schumer expressed strong concern on Friday about the proposed Softbank-Sprint merger, warning it could expose the US to Chinese cyberattacks.
Sources said Softbank agreed with US authorities to remove equipment made by China’s Huawei Technologies Co (華為) from Sprint and Clearwire Corp’s networks if the Japanese company completed its deal by the end of 2016.
Softbank president Masayoshi Son has said he will pull equipment made by China’s ZTE Corp (中興) if asked to by US regulators.
Last week, Clearwire’s board recommended Sprint’s sweetened buyout offer for the company after Sprint raised its bid to US$3.40 per share, from US$2.97 per share, for the 50 percent it does not own.
Clearwire shareholders are to vote on the deal on Friday. Sprint shareholders are due to vote on the Softbank offer on June 12.
Dish reiterated its warnings on Tuesday that a Softbank-Sprint tie-up posed national security risks.
“We believe the US government should proceed with deliberation and caution in turning over assets of national strategic importance — such as the Sprint fiber backbone and wireless networks — to a foreign-controlled entity with significant ties to China,” Dish spokesman Bob Toevs said.
In an e-mail, Huawei’s US-based spokesman William Plummer said: “No matter who wins the bid for Sprint, the future Sprint network will be sourced, in part, from China, just as are the networks of AT&T and Verizon and every other carrier. Every telecom infrastructure vendor, regardless of geography of headquarters, conducts R&D, codes software and manufactures gear ... in China.”
“Suggestions that networks and data will somehow be made safer by blackballing vendors based on geography of headquarters are either uninformed or dissembling,” Plummer added.