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Dish Says a SoftBank-Sprint Nextel Merger is Bad for National Security

24 May, 2013 By: Erik Gruenwedel

Satellite TV operator, citing a separate government regulatory concern, says acquisition of Sprint Nextel by SoftBank, which reportedly uses a Chinese subcontractor, could jeopardize national security

Dish Networks’ interest in merging with Sprint Nextel took on national security overtones when the satellite TV company alleged a rival bid by Soft Bank, a Japanese telecommunications company, included the possibility of exposing select federal government telecommunications to third-party Chinese contractors, spying and hacking.

Englewood, Colo.-based Dish has offered more than $25 billion to acquire Sprint Nextel, with designs to create a nationwide wireless network (and applicable products) it says would compete with AT&T and T-Mobile. Sprint Nextel already has a $12 billion offer from Soft Bank for a 70% stake in the telecommunications company.

Dish, in a May 23 regulatory filing, cited concerns by the Committee on Foreign Investment in the United States on a separate merger deal involving Clearwire and Chinese subcontractors.

CFIUS is an inter-agency committee of the federal government that reviews the national security implications of foreign investments in U.S. companies or operations.

Soft Bank defended foreign investment in the U.S. telecom sector, citing the presence of Britain’s Vodafone, through Verizon Wireless, and Deutsche Telekom’s T-Mobile operation in the United States. It said it would not use Chinese manufacturers.

Dish said the comparisons don’t work.

“Vodafone and Deutsche Telekom are not relevant to the national security discussion surrounding the proposed acquisition of Sprint by SoftBank,” said Stanton Dodge, EVP and general counsel with Dish. “Times have changed and there can be no doubt that today, a nationwide wireless network is an asset of national strategic importance. Additionally, unlike Sprint, neither Verizon wireless nor T-Mobile control a national fiber backbone serving national security interests including defense, law enforcement and other sensitive governmental operations.”

Dodge said the underlying point of differentiation with SoftBank is that Dish does not operate infrastructure subject on Chinese equipment, and subcontractors. 

“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,” Dodge said.

Soft Bank, in a statement, called Dish’s latest filing “undignified xenophobic rhetoric.”

Meanwhile, late May 24, Sen. Charles Schumer, D-N.Y., issued a statement voicing concerns that a Soft Bank majority stake in Sprint Nextel could expose the U.S. to Chinese cyber attacks.

"I have real concerns that this deal, if approved, could make American industry and government agencies far more susceptible to cyber attacks from China and the People's Liberation Army," Schumer said in a statement. "We must proceed with extreme caution before allowing something as vital as our communications and Internet infrastructure from falling into the hands of a foreign company with reported ties to China.”

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