SoftBank's bid for Sprint clears security review

An interagency committee has determined that SoftBank's proposed purchase of Sprint would not jeopardize national security, the companies announced on Wednesday. 

To allay security concerns, SoftBank, a Japanese company, agreed to give the U.S. government veto power over the appointment of one Sprint board member, who would oversee national security issues for the company. The government would also be able to review and approve contracts with certain network equipment makers.  

The deal must still receive approval from the Federal Communications Commission (FCC), which is considering whether the purchase would be in the public's interest. Sprint's shareholders are scheduled to vote on whether to accept SoftBank's offer on June 12.

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The national security review was led by the Treasury Department and also included the Justice Department, the Homeland Security Department and other agencies. The interagency committee, called CFIUS, must approve all purchases of U.S. businesses by foreign companies. 

Dish Network is pushing a competing offer for Sprint and has been drumming up fears that SoftBank could expose Sprint's networks to hackers.

Sens. Charles Schumer (D-N.Y.) and John McCain (R-Ariz.) sent letters to regulators last week raising security concerns about the SoftBank deal.

McCain noted that Sprint owns the rights to large swathes of airwaves and has numerous contracts with government agencies.

“I have real concerns that this deal, if approved, could make American industry and government agencies far more susceptible to cyberattacks from China and the People’s Liberation Army, already the number one source of electronic espionage against American interest," Schumer wrote.

The fears stem from the fact that in many countries, SoftBank relies on telecommunications equipment produced by Chinese firms such as Huawei and ZTE. Because of those companies' ties to the Chinese government, the House Intelligence Committee determined in a report last year that they pose a threat to U.S. national security.

The congressional investigators feared Huawei and ZTE could build back doors into their equipment, allowing the Chinese government to spy on the communications of U.S. companies and people.

In addition to giving the U.S. government oversight power over certain network equipment vendors, SoftBank has said it will strip out Huawei's equipment from Clearwire—a wireless network operator that Sprint is trying to buy.

Dish has also raised alarms about SoftBank's ties to UTStarcom, a company that admitted to bribing Chinese officials for telecommunications contracts. Masayoshi Son, the founder and CEO of SoftBank, was chairman of the board of UTStarcom from 1995 until 2003.

"The settlement documents do not name, implicate, or otherwise relate to SoftBank or Mr. Son, and are legally and factually irrelevant to this proceeding," SoftBank wrote in a recent filing with the FCC.