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Senator urges 'extreme caution' on SoftBank -Sprint deal

People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly
People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly

By Doug Palmer and Liana B. Baker

WASHINGTON (Reuters) - An influential senator expressed strong concerns on Friday about Japanese company SoftBank Corp's <9984.T> plan to buy 70 percent of Sprint Nextel , warning it could expose the United States to Chinese cyber attacks.

"I have real concerns that this deal, if approved, could make American industry and government agencies far more susceptible to cyber attacks from China and the People's Liberation Army," Senator Charles Schumer of New York said in a statement.

"We must proceed with extreme caution before allowing something as vital as our communications and Internet infrastructure from falling into the hands of a foreign company with reported ties to China," said Schumer, the third-ranking Senate Democrat.

Schumer elaborated on his concerns in a letter to U.S. Treasury Secretary Jack Lew and acting Federal Communications Commission Chairwoman Mignon Clyburn.

SoftBank owns nearly a third of the Chinese e-commerce company Alibaba and uses equipment manufactured by Chinese telecommunications companies Huawei and ZTE.

Both the FCC and the Committee on Foreign Investment in the United States, an interagency panel chaired by the U.S. Treasury, have to sign off on the proposed deal, which U.S.-based Dish Network Corp has been trying to stop because it wants to buy Sprint.

Dish ramped up a public relations offensive in Washington this week against SoftBank, meeting with staffers on Capitol Hill and taking out full-page ads in Washington newspapers.

The satellite company has been trying to draw parallels to the 2006 Dubai Ports World controversy, when a political storm disrupted a deal by the United Arab Emirates company to buy several U.S. ports even after it was approved by national security reviewers.

Schumer was also involved in bringing attention to that deal.

Matt House, a spokesman for Schumer, confirmed the senator had discussed the issue with Jessica Straus, his former campaign finance director who now works for Dish as its government relations manager.

But Schumer decided he had concerns about the SoftBank-Sprint deal before his conversation with Straus, House said.

'SIDESHOW'

Questions about Straus' ties to Schumer are "a sideshow that fails to address the serious national security concerns raised by a SoftBank-Sprint deal that have been recognized by a chorus of leaders on both sides of the aisle," Dish spokesman Bob Toevs said.

SoftBank bid $20.1 billion last October for a 70 percent stake in Sprint. Dish countered with its own $25.5 billion offer in April and quickly launched an offensive to undermine SoftBank's standing with regulators and the public.

In his letter to Lew and Clyburn, Schumer said the SoftBank-Sprint deal raised national security concerns because Sprint, together with its affiliate Clearwire Corp , controlled more broadband spectrum than any other company.

As part of the deal, SoftBank has promised to remove Huawei equipment from Clearwire's systems.

"Unlike Dish, SoftBank has publicly committed to removing equipment already located inside a U.S. network that the government has national security concerns about. SoftBank's proposal therefore, enhances U.S. national security," said Jim Barron, managing director of Sard Verbinnen & Co in New York, a public relations firm working for SoftBank.

"Dish has made no such commitment to remove this network equipment and to do so would require Dish to further increase the amount of debt it will need to complete any transaction," Barron said.

While Dish has not committed to removing Clearwire's Huawei equipment if it buys Sprint, Toevs, the Dish spokesman, pointed to a Dish statement on Thursday saying the satellite company was "committed to working with the appropriate agencies to meet national security goals."

(Reporting by Doug Palmer in Washington and Liana Baker in New York; Additional reporting by Sinead Carew in New York; Editing by Jackie Frank and Peter Cooney)

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