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By: Danny Zimny-Schmitt
Sprint Nextel, the #3 telecommunications company in the U.S., announced that it plans to be acquired by the Japanese firm Softbank last October.
According the CEO Dan Hesse, Softbank plans to acquire at least 70 percent of Sprint later this year in a deal valued at $20 billion. As of March, Softbank had already injected more than $3 billion into Sprint.
But that is only where the story begins. In October, Sprint upped its stake to 50.8 percent in Clearwire, the wireless broadband communications service based in Bellevue, Washington that serves retail and wholesale customers in the U.S., Spain, and Belgium. This majority stake gives them voting control over the company.
Sprint’s increased stake in Clearwire happened shortly after Softbank agreed to purchase Sprint. It was reportedly a condition of Softbank’s takeover, as the company wanted full control over Clearwire’s “vast reserves of spectrum.”
Control over Sprint, the third largest U.S. wireless carrier, and Clearwire will give Softbank control over significantly more U.S. wireless spectrum than any other company.
As a result, the U.S. Department of Justice asked the Federal Communications Commission to defer the Sprint/Softbank merger in late January, saying it was “currently reviewing this matter for any national security, law enforcement, and public safety issues.” Such reviews are commonplace when major U.S. businesses move to foreign ownership.
In late March, the U.S. government announced it wanted to oversee network equipment purchases in order to keep Chinese network equipment, namely Huawei and ZTE products, out of the U.S. infrastructure system. In 2012, a Congressional report labeled Huawei and ZTE equipment a national security risk. Softbank uses Huawei on its own home network in Japan.
In an attempt to speed up the authorization process, Softbank announced that it would not use any Huawei network equipment within the U.S. carrier’s existing network. The deal was expected to pass the scrutiny of the Justice Department and FCC to close later this quarter, until Dish Network Corp. decided to jump into the game in mid-April.
Dish made a counterbid of $25.5 billion for Sprint (compared to Softbank’s original $20 billion bid), and asked the FCC to defer Softbank’s offer while Sprint further evaluates which to accept.
What will this mean for consumers, regardless of how the deal closes? It will likely mean a weakening of the growing AT&T and Verizon duopoly, giving Sprint more financial power to implement new strategies and ideas to attract new customers.
But with the deal itself still pending approval, only time will tell how Softbank will manage its new access to the U.S. market and how American cell phone users will fare in Sprint’s new world.
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