Japan's SoftBank Corp., which plans to take over
Sprint Nextel Corp.
), the third-largest wireless carrier in the U.S., cleared a
major hurdle by reaching an agreement with the U.S. government
officials regarding the country's security matters.
Per the agreement, the U.S. government will have the authority
to assess the equipment purchased by the potential merged entity
(Sprint and SoftBank) from any foreign vendor. Such a move
initiated by the U.S. government will protect the nation from a
cyber security threat.
Sprint's sister concern -
) - uses Huawei manufactured products on its network. Similarly,
SoftBank also uses Chinese built equipment on its network. Thus,
the U.S. government anticipates a cyber threat.
In order to counter such a threat, the U.S. government will
create a four-member team representing government officials,
which will evaluate all the future equipment deals for Sprint
once it gets merged with SoftBank. A Sprint board member will
also be in the team, thereby offering more transparency. SoftBank
has also decided to do away with Chinese equipment once the
merger is accomplished.
Japan-based SoftBank proposed to buy 70% of Sprint's stake for
a total consideration of $20.1 billion, subject to approvals.
SoftBank has cleared almost all the hurdles except securing
Sprint's shareholders' vote of confidence and the final approval
from the FCC.
), which had earlier made a counter offer of $25.5 billion to
acquire the full stake of Sprint, is now voicing concerns about
national security related to the Sprint and SoftBank merger.
Despite DISH Network's concern over cyber threats, we believe
that the deal will finally mature as the country lacks sufficient
spectrum strength. So, the U.S. government is supporting the
merger. A few days back, the U.S. telecom sector saw another
important merger of T-Mobile USA and MetroPCs. The newly merged
entity is presently called
T-Mobile US, Inc.
). So, it is highly anticipated that in near future many such
merger will take place in the U.S.
Currently, Sprint has a Zacks Rank #3 (Hold).
CLEARWIRE CORP (CLWR): Free Stock Analysis
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