SoftBank Willing to Appoint US-approved Security Director to Sprint's Board

Sprint has been in the news lately. In an attempt to acquire Clearwire a few days ago, they increased their bid. On the back end of this, Japanese telecommunications company SoftBank Corp. is attempting to acquire Sprint. Not too long ago on April 15, DISH Network also put in a bid to acquire Sprint.

There is a lot of concern from many groups about having a foreign corporation having control over a U.S. telecommunications company. Last night, May 22, the Wall Street Journal reported that SoftBank Corp. has agreed on a plan that would allow the U.S. federal government the right to approve one of the directors it names to Sprint’s board. That director will have the responsibility of overseeing national security issues.

There is also the matter of the government seeking the right to approve some of Sprint’s equipment purchases and wanting the removal of Chinese gear from a Sprint affiliate’s network. Clearwire is using equipment from China-based Huawei Technologies. The equipment is in the outer fringes of its network. If Sprint acquires Clearwire, this equipment is already in place.

You can see the growing number of concerns from so many different parties when it comes to a foreign buyer wanting a U.S. telecommunications company. Representatives from the department of Justice, Defense and Homeland Security are all involved in reviewing such a takeover. I would be remiss if I did not mention that the Federal Bureau of Investigation (FBI) is also involved.

At the beginning of this week, SoftBank granted Sprint a waiver which allows it to consider DISH’s bid for the company. The current offer from SoftBank is $20.1 billion for a 70-percent stake of the company. DISH’s offer is $25.5 billion for 100 percent of the company.

The waiver gives Sprint permission to disclose non-public information and engage in negotiations with DISH concerning its buyout proposal. The Sprint Board of Directors has the right to terminate the existing merger agreement with SoftBank to accept a superior offer. The actual vote is scheduled to take place next month, on June 12.

DISH’s executive vice president and general counsel, Stanton Dodge, had the following comments: “We remain concerned…that these reported steps do not adequately protect our national security interests, especially with respect to Sprint’s critical fiber backbone network and Sprint’s extensive contracts to provide important telecommunications services for government, law enforcement and defense customers.”

SoftBank CEO Masayoshi Son has told the House Intelligence Committee Chairman Mike Rogers that he would remove the equipment from Huawei Technologies. This process could cost SoftBank up to $1 billion. However, this is now something that is desired by U.S. officials.

The government-approved director would be one of 10 directors on Sprint's board and would be responsible for making sure that Sprint complied with the agreement on network security. The director would also be a member of the Sprint board's compensation committee.

It looks like there will be quite a few more discussions between now and June 12, when the vote to accept or decline SoftBank’s offer will take place.