DISH: CFIUS Agreement Fails to Adequately Address the Significant National Security Risks of SoftBank-Sprint
ENGLEWOOD, Colo.--(BUSINESS WIRE)--
DISH Network (NASDAQ: DISH) responded to news today that the Committee
for Foreign Investment in the United States (CFIUS) has approved
SoftBank Corporation's acquisition of Sprint Nextel Corporation, subject
to certain conditions.
The following statements can be attributed to Stanton Dodge, DISH
executive vice president and general counsel:
"We believe the U.S. government should proceed with deliberation and
caution in allowing assets of national strategic importance -- such as
the Sprint fiber backbone and wireless networks -- to be owned and
operated by a foreign company with significant ties to China. Oversight
and accountability for these assets are critical at a time when offshore
cyber attacks, including the hacking of weapons systems designs,
continue to rise. Congress should take a close look at the CFIUS review
process in this instance.
DISH provided the following responses to the specific conditions of the
undisclosed National Security Agreement as reported by SoftBank:
"SoftBank and Sprint must appoint an independent member to the New
Sprint board of directors to serve as the Security Director. The
Security Director will be approved by the [U.S. Government] USG Parties,
oversee Sprint's compliance with the National Security Agreement and
serve as a contact for the USG Parties on all security-related matters.
In addition, the Security Director is required to have expertise and
experience with national security matters, be a U.S. resident citizen,
and hold appropriate security clearances."
While the requirement to have an appropriately credentialed Security
Director approved by the U.S. government is very common to CFIUS
agreements, it does little to address the practical risks of national
security breaches, including cyber attacks, because hacking on the
ground is not often detected in the boardroom.
"Once Sprint either obtains operational control of Clearwire or
consummates its proposed acquisition of Clearwire, USG Parties will have
a one-time right to require Sprint to remove and decommission by
December 31, 2016 certain equipment deployed in the Clearwire network."
This key provision of the agreement may well never become effective if
Sprint does not acquire 100 percent of the equity of Clearwire (and,
at a minimum, it appears unlikely that Crest Financial will tender its
shares to Sprint) or Sprint does not obtain operational control of
Clearwire (and Sprint has been arguing vociferously at the FCC that it
does not have such control today despite being a majority shareholder
of Clearwire and having the right to appoint a majority of the
Clearwire board). Therefore, this provision may ultimately prove to be
There is also a long time between now and the end of 2016 — creating
an immense period of interim vulnerability. Further, this provision
does nothing to ensure that SoftBank does not, after 2016,
re-introduce similar equipment to the Clearwire network.
"The USG Parties will have the right to review and approve certain
network equipment vendors and managed services providers of Sprint, as
well as of Clearwire once Sprint completes its proposed acquisition of
The U.S. government itself has been the victim of numerous cyber
attacks. As a result, its "review and approval" of equipment vendors
and service providers cannot insure against national security
breaches. Just this week, there have been reports that many critical
U.S. defense systems have been hacked by Chinese attackers.
Sprint has numerous contracts with the U.S. government, transmitting
confidential and possibly classified information. Foreign ownership of
the network and facilities transmitting this data creates serious
national security concerns for the federal government.
The attempted acquisition of several strategic U.S. port operations by
Dubai Ports World in 2006 was ultimately scuttled on national security
grounds, despite having initially received clearance from CFIUS.
SoftBank-Sprint is potentially more dangerous from a national security
perspective than the Dubai Ports World proposal for the following
reasons, among others:
In the Dubai Ports matter, the foreign acquirer was not acquiring the
ports themselves but rather a company that helped manage operations at
the ports. SoftBank, by contrast, is seeking to own and operate
Sprint's nationwide fiber backbone and wireless networks.
Sprint is a leading contractor to the U.S. government and has multiple
contracts with the U.S. Department of Defense
The assets at issue in this case — nationwide fiber backbone and
wireless networks of national strategic importance — are even
more vulnerable than maritime ports and are the subject of
significantly more frequent and threatening activity.
Telecom infrastructure, a mix of hardware and bits, is more difficult
to police than the cement-and-mortar ports.
The timing of this transaction compels action more urgently than the
Dubai Port World controversy, coming as it does on the heels of the
discovery that China, with which SoftBank has a number of links,
has hacked U.S. weapons systems designs. At a time when the President
plans to press the issue of weapons hacking with the Chinese
leadership, it seems ill-advised to hand over a key piece of our
national infrastructure — the piece that enables hacking — to a
foreign company with numerous ties to China.
DISH Network Corporation (NASDAQ: DISH), through its subsidiary DISH
Network L.L.C., provides approximately 14.092 million satellite TV
customers, as of March 31, 2013, with the highest quality programming
and technology with the most choices at the best value, including HD
Free for Life®. Subscribers enjoy the largest high definition
line-up with more than 200 national HD channels, the most international
channels, and award-winning HD and DVR technology. DISH Network
Corporation's subsidiary, Blockbuster L.L.C., delivers family
entertainment to millions of customers around the world. DISH Network
Corporation is a Fortune 200 company. Visit www.dish.com.
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Additional Information About the Proposed Transaction and Where to
This communication relates to a business combination transaction with
Sprint Nextel Corporation proposed by DISH Network Corporation, which
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DISH Network Corporation
Jason Kiser, 303-723-2210
Source: DISH Network Corporation
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