April 16 (Bloomberg) -- Dish Network Corp.’s bid for Sprint Nextel Corp. may benefit from not involving a foreign buyer, and could find favor with U.S. regulators eager to boost competition among mobile providers, analysts said.
Charlie Ergen, chairman of second-largest U.S. satellite television provider Dish, yesterday offered $25.5 billion for Sprint, based in Overland Park, Kansas. The third-largest U.S. mobile provider also is being pursued by Tokyo-based Softbank Corp., whose $20 billion offer has attracted scrutiny from U.S. regulators and lawmakers over whether its use of Chinese-made telecommunications servers may pose security risks.
Ergen’s proposal doesn’t have “some of the obvious national security and public safety issues that the Justice Department has raised over potential concerns about Softbank,” Bill Berkowitz, a partner with Bingham McCutchen LLP in Boston, said in an interview.
The offer from Englewood, Colorado-based Dish wouldn’t need to undergo the review Softbank faces by the Committee on Foreign Investment in the U.S., an interagency panel that scrutinizes acquisitions of U.S. companies by foreign buyers for national security concerns.
“We don’t see an FCC issue really, probably in either one of the merger proposals to Sprint, but we certainly have an advantage on the Justice Department side because we don’t go through a foreign ownership CFIUS review, so there would be no controversy there with us as a U.S. company,” Ergen said.
Gina Talamona, a Justice Department spokeswoman, and Neil Grace, a Federal Communications Commission spokesman, declined to comment.
Softbank and Sprint have said they wouldn’t integrate equipment from China’s Huawei Technologies Co. into Sprint’s network after they merged, Representative Mike Rogers, a Michigan Republican who leads the House Intelligence Committee, said in an e-mailed statement March 28.
The U.S. government should block acquisitions or mergers by Huawei and ZTE Corp., China’s two largest phone-equipment makers, Rogers’ committee said a report in October. It said the companies’ equipment can provide an opening for Chinese intelligence services to use U.S. telecommunications networks for spying.
U.S. wireless companies are chasing consumers who increasingly use mobile devices to talk, share videos and visit websites. Since 2011, AT&T has tried to buy smaller rival T-Mobile USA Inc. and failed after regulators objected to eliminating a competitor. Verizon Wireless based in Basking Ridge, New Jersey, has bought airwaves from Philadelphia-based Comcast Corp. and other cable providers.
Ergen’s bid, like that by Softbank President Masayoshi Son, would enhance third-largest U.S. wireless carrier Sprint’s potency as a challenger to market leader Verizon Wireless and No. 2 AT&T Inc. The combination would need approval from antitrust and telecommunications agencies.
“Regulators in general would welcome it,” Paul Glenchur, Washington-based senior analyst with Potomac Research Group, said in an interview. “If it’s seen as strengthening competition to AT&T and Verizon Wireless, they would want that deal to go ahead.”
Softbank’s bid for Sprint is being reviewed by the FCC. Antitrust regulators at the Justice Department cleared the deal in December. The same agencies would review a Dish bid for Sprint.
“A Dish-Sprint deal, like Softbank-Sprint, would have relatively little trouble,” Jeffrey Silva, a Washington-based analyst with Medley Global Advisors, said in an interview. “Neither one is removing a national competitor, which is the working baseline for antitrust authorities.”
With a merger Dish could “market television and wireless services the way Verizon does -- that makes the transaction pro-competitive and I don’t see that the Justice Department is going to have a problem,” Melissa Maxman, an antitrust lawyer with Cozen O’Connor in Washington, said in an interview.
AT&T, based in Dallas, abandoned its bid for fourth-largest U.S. carrier T-Mobile, based in Bellevue, Washington, in 2011 after opposition from the FCC and Justice Department.
The Justice Department in an April 11 filing at the FCC said airwaves policies should provide opportunities for small carriers to acquire frequencies. The Justice Department in the filing said it would “maintain vigilance against any lessening of competitive forces.”
The FCC on March 12 cited strengthening of T-Mobile as it approved parent company Deutsche Telekom AG’s proposal to combine the unit with Richardson, Texas-based MetroPCS Communications Inc. The deal faces an April 24 shareholder vote after Bonn-based Deutsche Telekom sweetened its bid.