A Justice Department request to defer regulatory action on Softbanks $20 billion bid for Sprint Nextel follows criticism that an acquisition could expose domestic networks to Chinese companies.
The Justice Department, FBI and Department of Homeland Security asked the Federal Communications Commission to give them time to complete an assessment of the transactions national security and law enforcement implications, according to a filing posted Tuesday on the FCCs website.
The Justice request is common during reviews triggered when overseas companies, such as Tokyo-based Softbank, seeks control of a U.S. telecommunications company, said Jeffrey Silva, an analyst with Medley Global Advisors.
I wouldnt look at the DOJ letter as a red flag at all, Silva, based in Washington, said in an interview. Its routine given that foreign ownership is involved.
John Taylor, a Sprint spokesman, also called the Justice Department action a routine request.
Softbank said in October that it would buy 70 percent of Sprint, based in Overland Park.
The deal could harm U.S. security because Softbank works with Chinese phone equipment makers whose devices could expose American networks to Chinese spying, the Communications Workers of America said in an FCC filing Monday.
The FCC is due to take comments on the transaction until Feb. 25 and is about one-third of the way through its informal six-month timeline for considering acquisitions.
The communications workers union said Softbank is working with Huawei Technologies and ZTE, Chinas two largest phone equipment makers, to help build a wireless network in Japan. Softbanks acquisition of Sprint could lead to significant penetration of Huawei and ZTE into the U.S. market, the unions filing said.
A House Intelligence Committee report released in October said the U.S. government should block acquisitions or mergers by Huawei and ZTE, saying the companies provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying.
Huawei is not a party to the transaction at hand, William Plummer, a Washington-based spokesman for the company, said in an e-mail. Misguided proposals to blackball a company based on country of origin do nothing to secure networks in an industry where every vendor leverages common global supply chains.
Softbank buys base band units and antenna systems from Huawei and ZTE for its fourth-generation mobile network in Japan. Alcatel-Lucent and Ericsson provide the core network.
Executives for Huawei and ZTE, both based in Shenzhen, China, have denied links to Chinese espionage.