Sprint Nextel’s future continues to maintain an air of uncertainty despite its best efforts to stay on course. The latest bump in the road comes from a Reuters report that suggests possible suitor Softbank has lined up an alternative path in case its planned $20.1 billion investment in Sprint Nextel falls through.
The report indicated that Softbank has been in discussions with Deutsche Telekom regarding buying out the German telecom giant’s 74% stake in T-Mobile US should Softbank’s current attempt to acquire a 70% stake in Sprint Nextel fails. DT recently reduced its stake in its U.S.-based operations from its previous full control following T-Mobile USA’s merger with MetroPCS to form the new T-Mobile US entity.
T-Mobile US’ current market cap was at around $15 billion, though that spiked in late Friday trading following the Reuters report. DT has noted in the past that it was interested in reducing its interest in the U.S. market as it tries to focus efforts in its core European operations.
Softbank’s attempt to acquire a stake in Sprint Nextel does appear to still be on track with both parties anticipating a July closing. However, Dish Network has put in a $25.5 billion acquisition bid for a 68% stake in Sprint Nextel, which Sprint Nextel shareholders are set to vote on next week. Sprint Nextel’s board of directors have thrown their support behind the Softbank offer. Analysts had thought that Softbank could be forced to increase its bid for Sprint Nextel in order to keep the deal on track, though now it looks like Softbank could be looking at alternatives.
One downside to moving from Sprint Nextel to T-Mobile US would be that Softbank could be missing out on the vast 2.5 GHz spectrum holdings Sprint Nextel subsidiary Clearwire currently controls and is looking to use for a TDD-LTE network. Softbank is also rolling out a TDD-LTE network in Japan using the 2.5 GHz band and it’s thought that the combined operations could benefit from a larger scale.
Further complicating the Clearwire proceedings is the current bidding war between Sprint Nextel and Dish for the financially strapped carrier. Sprint Nextel put in an offer late last year to acquire the remaining stake in Clearwire it did not already own for $2.2 billion, only to have Dish put in a larger offer early this year. Sprint Nextel was forced to increase its bid just prior to a Clearwire shareholder vote on the offer, only to then have Dish again increase its bid for a stake in Clearwire. Clearwire’s shareholders are set to vote on those offers on June 13.
Despite the ongoing sideshow, Sprint Nextel looks to be keeping the Softbank proposal on track, announcing late today that retired Admiral Mike Mullen is set to join the company’s board of directors as an independent director upon the closing of the Softbank deal. Mullen will serve as the company’s security director where he will oversee “Sprint’s compliance with the company’s National Security Agreement with the U.S. government and serve as the U.S. government’s contact for all security-related matters.”
This position is tied to government concerns regarding the use of Chinese-made equipment in Clearwire and Sprint Nextel’s network, which Softbank currently uses in its Japan operations. The government – as well as Dish – have harped on concerns regarding the ability for the Chinese government to tap into equipment made by Chinese vendor Huawei in order to spy on U.S.-based telecommunications. Clearwire has used Huawei equipment in its network, which Sprint Nextel and Softbank have said they will remove should the deal be approved, while Sprint Nextel was reportedly told to not tap Huawei as an infrastructure partner for its ongoing Network Vision program that was announced in late 2010.
Further showing support for the measures, the Department of Justice, the FBI and the Department of Homeland Security all late Friday said they had withdrawn their requests to postpone the Softbank acquisition.
“The agencies have reviewed the information provided by the applicants and analyzed the measures undertaken by the applicants to address potential national security, law enforcement and public safety issues, including supply chain issues,” the three government agencies noted in a filing with the Federal Communications Commission. “Based on this review, the agencies hereby notify the commission that they have no objection to the grant of the applications.”
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