Will Sprint-SoftBank Get Tangled in the Flag?

In making a case against the SoftBank-Sprint deal, Dish Chairman Charlie Ergen has lots of financial arguments for why his offer is better.

But Ergen also makes the case that Sprint would be better in the hands of an American than controlled by a foreign entity.

That argument appears to be getting some legs. On Friday, influential New York Sen. Charles Schumer expressed concerns that a SoftBank deal could leave Sprint — and the U.S. — more vulnerable to Chinese hacking.

“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, already the number one source of electronic espionage against American interest,” Schumer 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.”

Schumer sent a letter to Treasury Secretary Jack Lew and acting Federal Communications Commissioner Mignon Clyburn. Both the FCC and the U.S. committee on foreign investment need to approve the deal.

SoftBank noted yesterday that it had gotten all the state-level approvals it needs, though the deal still requires shareholder approval — as well as the federal okays. A shareholder vote is scheduled for June 12, although a committee of Sprint outside directors is also evaluating Dish’s interest to see if its offer might yet lead to a superior bid.

As for Schumer’s interest, a person close to SoftBank notes that Dish’s top government relations executive — Jessica Straus — is also Schumer’s former chief fundraiser.

Dish praised Schumer’s letter. “We are pleased that Sen. Schumer shares our concern with SoftBank’s attempt to control an asset of national strategic importance and that he is calling for a careful review of a transaction that could ‘undermine core U.S. national-security interests.’ ” a Dish spokesman told AllThingsD.

A U.S.-based spokesman for SoftBank said, “The blatant attempt to politicize the (government approval) process by Dish is inappropriate and threatens to discourage important foreign investment in the United States.”

SoftBank has also been working on plans to ease government concerns over Chinese influence. One approach would let the U.S. have approval over one of SoftBank’s Sprint board members who would have responsibility for national security issues.

Image: Shutterstock / Andrea Izzotti