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No National Security Threat Seen in NTT's Proposed Purchase of Verio

August 24, 2000|From Reuters

WASHINGTON — President Clinton has decided to allow Japan's NTT Communications to buy U.S. Internet service provider Verio Inc., the White House announced Wednesday, saying the proposed deal would not threaten U.S. national security.

The $5.5-billion deal attracted intense scrutiny by Washington because of worries that it might expose the United States to foreign espionage by giving Japan's state-controlled NTT access to U.S. wiretapping activities.

"President Clinton has decided against intervening in the proposed acquisition of Verio . . . by NTT Communications," the White House said in a statement, saying the decision was based on the results of a "thorough" investigation by the government's Committee on Foreign Investment in the United States.

"As a result of the investigation and negotiations with NTT Communications and Verio, any national security issues that may have been presented by this transaction have been resolved," it added.

NTT Communications reached an agreement in May to buy the shares it did not already own of Verio for $60 a share, but has had to extend its tender offer six times to respond to U.S. national security concerns.

The deal would give NTT Communications, the long-distance and international phone unit of Japan's state-controlled telecom giant Nippon Telegraph & Telephone Corp., more expertise on Web site hosting and infrastructure.

The 11-member CFIUS, chaired by Treasury Secretary Lawrence Summers, last week recommended that Clinton not block the planned NTT purchase of Verio after a 1 1/2-month investigation that focused on national security issues stemming from the deal.

The Verio-NTT investigation was the first involving the foreign acquisition of a U.S. Internet service provider conducted under the 1950 Defense Production Act's Exon-Florio provision, which governs foreign acquisitions of U.S. companies involved in sensitive national security areas.

Under the law, the president may block a foreign purchase if he finds credible evidence that the acquirer might act to hurt U.S. national security or if U.S. laws do not give him sufficient power to safeguard national security in the deal under review.

Before recommending Clinton approve the acquisition, CFIUS representatives met with NTT and Verio representatives to try to address issues raised by law enforcement officials.

The White House gave no indication of which actions, if any, NTT may have taken to allay U.S. national security concerns.

The deal is being watched closely as a precedent for possible hurdles that Germany's state-controlled Deutsche Telekom may face with its planned purchase of U.S. mobile operator VoiceStream Wireless Corp. in a $48-billion deal.

Some U.S. legislators have expressed concern about the German government's current 58.2% stake in Deutsche Telekom.

On Wednesday, Verio shares rose 41 cents to close at $59.88 on Nasdaq; VoiceStream rose $4.19 to close at $111.88 on Nasdaq. Deutsche Telekom's American depositary receipts rose 88 cents to cloes at $38.25 on the New York Stock Exchange.

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