SoftBank and Dish Network have pulled out the stops in their $20 billion-plus battle to control Sprint Nextel. But SoftBank has the edge. Dish’s claim that Japanese ownership of the U.S. cellphone operator is a risk to national security is half-baked and shows boss Charlie Ergen’s desperation.
For sure, telecommunications infrastructure can be a matter of national security - all the more so when it carries traffic for the Pentagon and the raft of secretive agencies known by three-letter abbreviations, as Sprint does. Yet while the Chinese might present obvious questions, it’s a much less plausible claim that Japanese ownership of U.S. assets is risky. The countries have been close allies for approaching seven decades.
As part of its $20 billion bid for 70 percent of Sprint, SoftBank has also promised to appoint a director to Sprint’s board - someone vetted by the U.S. government - who will ensure sensitive data is kept out of reach of the Japanese owners.
This sort of arrangement has worked in the past to alleviate any residual concerns. When Singapore’s ST Telemedia acquired a majority stake in Global Crossing a decade ago, it signed an agreement with the federal government under which four board members received U.S. government approval and served as the security committee.
What’s more, SoftBank has promised to rip out networking equipment used by Sprint’s network partner Clearwire and produced by Huawei, a Chinese manufacturer embodying the U.S. Congress’s cybersecurity concerns. Last year, the House Intelligence Committee said telecom companies should avoid using the firm’s equipment because of its close ties to the Chinese government. SoftBank estimates the cost of replacement would be $1 billion.
Dish hasn’t yet made a similar promise alongside its $26 billion offer for all of Sprint, which suggests its complaint isn’t really about national security, but rather about having the weaker position in an M&A fight. Lawmakers and investors alike can afford to ignore the diversion.
Robert Cyran is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
