Sprint and SoftBank are one step closer to closing their $20 billion merger. The companies on Wednesday said the Committee on Foreign Investment in the United States completed its investigation of the proposed merger -- and there are no unresolved national security issues that would kill the deal.
As part of this aspect of the transaction's clearance, Sprint and SoftBank have entered into a National Security Agreement with the U.S. government. Sprint said agreement is effective as of the date of clearance by the committee, which is a U.S. Treasury Department agency, but will terminate if the merger agreement between Sprint and SoftBank is terminated. The investigation was mandated because of SoftBank's relationship with Chinese vendors.
Now, other U.S. agencies that oversee telecom, including the Department of Justice, Federal Bureau of Investigation, and the Department of Homeland Security, will review the transaction for national security, law enforcement and public safety concerns. When finished, those agencies will notify the Federal Communications Commission, which will then complete its public interest review of the deal.
Will the Deal Get Done?
Jeff Kagan, a telecom industry analyst in Atlanta, said this was a big step toward approval of a Sprint-SoftBank deal.
"This is a major hurdle that SoftBank has now crossed. This means the chances of the deal being completed looks much more likely," Kagan told us. "Sprint and SoftBank have come to an agreement with the U.S. government regulators that should protect the government, businesses and citizens from the Chinese spying threat."
Based on the fact that SoftBank has gone above and beyond to try to satisfy U.S. regulatory concerns, it's clear that the company wants to get the deal done. But will this be enough to take it to the finish line? Perhaps, Kagan said.
"I expected a long list of protections that the U.S. government would require. However, having four people on a special board to keep their eyes open for security concerns is a very big step," Kagan said, noting that anything can happen at this point because the deal involves so much political football.
"It looks like SoftBank will do whatever it can to satisfy U.S. regulators," Kagan said. "Apparently SoftBank really wants to get into the U.S. marketplace, and see's Sprint Nextel as the best path."
What About Dish?
Sprint and SoftBank expect the merger to be completed by July, but it's not a done deal. The merger is still subject to the remaining closing conditions from Sprint's board. And there is still a Dish Network offer on the table.
Dish is proposing a deal that includes $17.3 billion in cash and $8.2 billion in stock. The company's unsolicited offer trumps SoftBank's deal. Under the Dish deal, Sprint shareholders would receive $7 per share.
Nevertheless, it seems like a long shot. Sprint had already agreed to sell the Japanese wireless carrier a 70 percent stake in October 2012. And Sprint's Board of Directors continues to recommend its stockholders vote in favor of the transaction with SoftBank.