Sprint Nextel Corporation (NYSE:S) will have their prospective merger with Softbank Corp (PINK:SFTBF) delayed, according to news released today. The U.S. Department of Justice has requested that the Federal communications Commission delay the merger so that it has more time to review it.

sprint logo

The merger was announced last October, and both companies said, back then, that they hoped the merger would be approved by the middle of this year. After today’s announcement it appears that goal will not be met, and the Department of Justice review could even put a stop to the merger.

On January 17, DISH Network Corp. (NASDAQ:DISH) also requested that the FCC delay the merger. That request was made with the Sprint Nextel Corporation (NYSE:S) purchase of Clearwire Corporation (NASDAQ:CLWR) in mind. A deal for Sprint to purchase Clearwire for $2.97 a share has already been agreed, but cash from the Softbank acquisition will be needed to complete the purchase. Earlier today, DISH Network reneged on that request, saying that it would no longer pursue a delay in the merger.

The total value of the Sprint Nextel Corporation (NYSE:S) deal was over $20 billion, and would see Softbank Corp (PINK:SFTBF) acquire 70% of Sprint in exchange for cash. The Sprint purchase of Clearwire Corporation (NASDAQ:CLWR) is one of the most important aspect of the merger, and the one most likely to cause trouble for the closure of the deal.

When, and if, the deal that would see Sprint take control of Clearwire closes, Sprint Nextel Corporation would control wireless spectrums in the United States than any other corporation. Putting all of those assets in the hands of a Japanese company is a worry for the Department of Justice, and for the company’s competitors.

AT&T Inc. (NYSE:T) has not lodged a formal objection to the merger, but an executive has released a statement highlighting the sheer amount of spectrum that Softbank would take hold of if the deal were completed. Competitors are nervous about a Sprint Nextel Corporation that actually has the cash to invest in capital, and compete with the big players.

National security concerns are often highlighted in mergers between US companies and large foreign corporation. The Department of Justice is also using this as a reason to delay the merger. Other agencies, including the FBI and the Department of Homeland Security, are also investigating the deal, on the grounds that it might give too much power to a foreign body.

The Softbank Corp (PINK:SFTBF) deal would see Sprint Nextel Corporation (NYSE:S) finally see enough capital to properly invest in a next generation mobile data network. $8 billion from the merger is expected to be directed towards upgrading the company’s wireless network. If the deal doesn’t go through, Sprint would be left short on CapEx funding for 2013, and years ahead.

National Security issues may seem quaint to some in the market, particularly with Japan being such a long time ally of US interests.  But there are real issues to consider, if a Chinese company were to attempt the purchase of such a large and important part of North American infrastructure. China has never fought a major war with the United States.