Petitions to Deny Filed Against Softbank’s Proposed Buy of Sprint
The Communications Workers of America formally asked the FCC to reject a proposal by Japan’s Softbank to buy Sprint Nextel. CWA filed a petition to deny at the commission, a step it did not take in November when it raised job-related concerns over Deutsche Telekom’s proposed combination of T Mobile USA with MetroPCS. The Consortium for Public Education, and the Roman Catholic Diocese of Erie, Pa., also filed a petition to deny Sprint’s takeover, as did a group of CLECs.
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The deal is running into more opposition than the other major wireless merger before the agency, T-Mobile/MetroPCS, though far below the massive wave of opposition that ultimately killed AT&T’s bid in 2011 to buy T-Mobile.
"The significance of the proposed Softbank/Sprint/Clearwire transaction on the development of the U.S. wireless market -- and therefore on wireless consumers, workers in the industry, and the U.S. economy -- cannot be overstated,” CWA said (http://xrl.us/boddfn). “With this transaction, Sprint aspires to join Verizon and T-Mobile as the third major wireless carrier in this country with significant, and in this case majority, foreign ownership.”
If the FCC approves the deal, it should also impose mandates that Sprint build out its network using the spectrum it already controls, including its significant Broadband Radio Service (BRS) and Educational Broadband Service (EBS) holdings, 2.5 GHz spectrum that has been lightly used for data. Softbank and Sprint argue that the deal means an $8 billion capital infusion for Sprint, but so far, Sprint offers only “vague promises” about its network buildout, CWA said. “Sprint has previously reneged on vague commitments in prior proceedings, including falling short of the build-out it promised in acquiring Clearwire in 2008 and its promises rapidly to conclude the 800 MHz Rebanding (which is now approaching its 10th year),” the union said. CWA said the FCC should impose the same buildout requirements imposed on Verizon Wireless when its buy of AWS-1 licenses from SpectrumCo was approved -- a mandate that Verizon cover 30 percent of the total population of the areas being acquired within three years and 70 percent within seven years.
CWA also raised national security concerns, citing Softbank’s and Clearwire’s “close association” with Chinese equipment vendors Huawei and ZTE. “Huawei and ZTE are helping to build Softbank’s next generation 4G wireless network in Japan,” the group said. “Huawei also helped build wireless networks for Clearwire.” The Chinese companies were the subject of a report last year by the House Intelligence Committee, which said the U.S. government and American companies shouldn’t do business with either (CD Oct 10 p3). “Sprint is a major government contractor, with more than $1 billion in U.S. government telecommunications contracts over the past six years,” CWA noted. “The danger should be clear. Softbank’s purchase of Sprint (and its related majority interest in and control of Clearwire) will lead to significant penetration of Huawei and ZTE into the U.S. market, with the potential to open critical U.S. infrastructure to espionage and cyber-security threats from foreign states."
The FCC should deny the merger or force Clearwire to sell off all its EBS leases, said the Consortium for Public Education, and the Diocese of Erie. “Clearwire and Sprint together under foreign control by Softbank would control an eye popping average of 215 MHz of spectrum in the top 100 U.S. markets,” they said (http://xrl.us/boddup). “This is nearly as much spectrum as is held by AT&T and Verizon put together, and many times more than any other single U.S. carrier.” The EBS interests said putting that much spectrum under a foreign company is “unthinkable."
Three CLECs -- nWire, Pac-West Telecomm and Tex-Link Communications -- also filed a joint petition to deny. The three are in a dispute with Sprint over intercarrier compensation payments (http://xrl.us/boddvd). Crest Financial, an investment company, filed a petition to deny, saying it has an investment in Clearwire and believes the company should maintain some independence from Sprint (http://xrl.us/boddvj). Crest has asked the commission to reconsider its approval of a deal giving Sprint majority control of Clearwire (CD Jan 8 p10).
Verizon Wireless took no position on whether the deal should be approved, but said the FCC should add Sprint and Clearwire’s EBS/BRS spectrum to the spectrum screen used in evaluating the deal. The current screen takes in only 55 MHz of BRS spectrum, Verizon noted. It’s “arbitrary for the Commission to include only 55 MHz of BRS spectrum in the screen and exempt the remaining BRS/EBS spectrum,” the carrier said (http://xrl.us/boddwe). “Virtually all of the 194 MHz of BRS/EBS spectrum -- not merely the 55 MHz that is currently included -- is both suitable and available for use to provide mobile services, and thus meets the Commission’s criteria for inclusion."
The Department of Justice, meanwhile, asked the FCC to put off any decision until its investigation, in coordination with the Department of Homeland Security, is complete. The departments “are currently reviewing this matter for any national security, law enforcement, and public safety issues but have not yet completed that effort,” DOJ said (http://xrl.us/bodd8n). Such deferral letters are typical in the cases of transactions involving a foreign player.
Tuesday was day 60 on the FCC’s unofficial 180-day shot clock for its review of Softbank/Sprint, a deal unveiled in Tokyo in October (CD Oct 16 p1). Japan’s No. 3 carrier is making a $20.1 billion investment in Sprint in exchange for a 70 percent stake.