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SoftBank gives Washington veto over Sprint board job

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Japanese company SoftBank, currently wrapping a deal to buy 70 per cent of US mobile carrier Sprint, has taken the unusual step of giving the US government veto power over one member to be elected to the board of its acquisition target.

SoftBank’s bid to take over America’s third largest operator was delayed for months while it waited for approval from 23 separate states.

That process came to a close today after the California Public Utilities Commission approved the deal. The Japanese firm still needs shareholders to approve the transaction in a 12 June vote.

In the meantime it must also satisfy a US government increasingly wary of foreign takeovers, especially in an area like telecoms with obvious national security implications.

SoftBank’s proposed deal is currently being assessed by the FCC, Justice Department, FBI and the Treasury-led Committee on Foreign Investment in the US (CFIUS), according to the Wall Street Journal.

People familiar with the matter told the paper that not only was SoftBank prepared to give the government right-of-approval on one of Sprint’s next board members, but it may also be forced to consider giving Washington approval powers on future equipment purchases.

It isn’t helping matters that one of SoftBank’s majority-owned businesses, Clearwire, uses Huawei kit.

Lawmakers branded the Shenzhen-based telecoms kit manufacturer a national security risk in a high profile report last October, and a US spending bill back in March banned certain agencies from buying any technology from firm thought to be “owned, operated or subsidised” by the Chinese government.

Although Huawei has consistently denied links to the Chinese authorities and Japan’s third largest operator has apparently already given the US its word that any Huawei kit would be removed from Clearwire post-takeover, doubts persist.

Sensing an opportunity to turn those doubts into action, US satellite biz Dish has been on the offensive this week in an attempt to sell its $25.5bn bid for Sprint to shareholders and government.

“If the news reports are accurate, and CFIUS has concerns with respect to the use of Chinese manufactured equipment on a foreign-controlled Clearwire network, then as much as $1 billion would have to be added to the cost of the proposed SoftBank-Sprint transaction,” said Dish general counsel Stanton Dodge in a canned statement.

“The question is about who should control and who will be accountable for assets – the Sprint national wireless and backbone fiber networks – that are vital to our national security.” ®

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