T-Mobile-Sprint merger presents little rationale for Cfius to block deal

13 November 2018 11:58am

9 November 2018. By Curtis Eichelberger.

While the Committee on Foreign Investment in the United States is still reviewing the T-Mobile-Sprint merger for national security concerns, it’s hard to see any rationale for Cfius holding up the deal.

Concerns were raised when the companies announced their proposed merger in April because the deal involves a German company acquiring a Japanese company in one of the US’s most highly sensitive industries. Calls for a heightened review have come in recent weeks as former members of Congress and the State Department have asked for Cfius scrutiny.

It’s noise.  

For example, foreign policy professionals announced a public awareness campaign this week called, “Protect America’s Wireless.” Former House Intelligence Committee Chairman Mike Rogers, a Michigan Republican, took part in a press call to promote the campaign.

“I know Cfius is going to look at this, and look at this hard,” he said. “My encouragement is they should look at it hard, and if these companies ever wanted to move forward on anything, they would have to fundamentally make commitments, I would hope they'd be willing to make, but I'm not sure that they're willing to make them at this point.”

But like other critics, Rogers lacked a specific complaint that could be acted upon by Cfius.

SoftBank’s venture capital division has received money from the Saudi Arabia Public Investment Fund, chaired by Crown Prince Mohammed Bin Salman. This has drawn the ire of critics, too.

On the same call, Ali Al-Ahmeda Saudi scholar and expert on Saudi political affairs at The Gulf Institute, said, “I am a long-time customer of T-Mobile. So are many of my friends. This makes me extremely uncomfortable to see Saudi-backed control of my cell provider. I am a journalist and critic of the Saudi government. (Jamal) Khashoggi was a T-Mobile customer, too. According to the New York Times this past week, the Saudi authorities were looking for Khashoggi's phone after murdering him and kept asking the Turkish government for it. This shows that the Saudi government is extremely focused on obtaining phone records, contacts, and contents of their critics.”

It's difficult, however, to see how the Saudi fund could use its current investment in the Softbank-run venture capital division to gain access to T-Mobile networks — or how the proposed merger with Sprint would pose an additional threat.

When Softbank announced it was buying a majority share of Sprint in October 2012, the company had to agree to several Cfius conditions, including giving the departments of Defense, Homeland Security and Justice the power to review and veto new equipment purchases in specific circumstances. And the company also had to appoint a new Sprint board member, with approval from the US government, to oversee national security compliance.

Media outlets reported at the time that SoftBank had also agreed to remove equipment made by China’s Huawei Technologies from Sprint networks.

The companies knew they would undergo a similarly rigorous review this time.

“Given the increased focus on cybersecurity issues, it stands to reason that a great deal of activity that is of concern to the security agencies is being carried out on privately-owned networks,” said John Kabealo, founder of Kabealo PLLC and an attorney who has handled hundreds of Cfius reviews and negotiated telecommunications security agreements with the US government in the past.

“Sprint and SoftBank worked out these issues in the prior transaction, and the parties here are motivated to get the deal done and achieve the synergies that should result from it,” Kabealo said. “I don’t think that this is the type of case that Cfius would want to block. So, if the parties can get comfortable with what Cfius expects, it is probably green lights on all sides. Then it’s all eyes on antitrust.”

Telecom mergers like that of T-Mobile and Sprint present the US government an opportunity to get an inside look into how these corporations are running their businesses and protecting US communications from those who would seek to harm Americans.

The Cfius review is ongoing, but that doesn’t suggest a heightened threat to the deal, so much as an extended period in which the government can dig into one of the nation’s largest telecom networks.

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