Bloomberg News

Softbank, Sprint Pledge Not to Use Huawei, Lawmaker Says

March 28, 2013

Softbank, Sprint Pledge Not to Use Huawei, U.S. Lawmaker Says

The U.S. government should block acquisitions or mergers by Huawei and ZTE Corp., China’s two largest phone-equipment makers, Representative Mike Rogers said in an e-mailed 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. Photographer: Angel Navarrete/Bloomberg

Softbank Corp. (9984) and Sprint Nextel Corp. (S:US) told a U.S. lawmaker they won’t integrate equipment from Chinese gear maker Huawei Technologies Co. into Sprint’s network after they merge, the legislator said.

“I expect them to make the same assurances before any approval of the deal” by U.S. agencies reviewing the proposed $20 billion merger for national security implications, Representative Mike Rogers, a Michigan Republican who leads the House Intelligence Committee, said in an e-mailed statement.

Tokyo-based Softbank and Overland Park, Kansas-based Sprint, the third-largest U.S. carrier, are trying to meet U.S. concerns about potential electronic spying by China.

The U.S. government should block acquisitions or mergers by Huawei and ZTE Corp. (000063), 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.

“I have met with Softbank and Sprint regarding this merger and was assured they would not integrate Huawei in to the Sprint network and would take mitigation efforts to replace Huawei equipment in the Clearwire network,” Rogers said. Sprint owns a majority share of its wireless partner Clearwire Corp. (CLWR:US)

Huawei Response

The deal has been reviewed by the U.S. Federal Communications Commission, the Justice Department and an interagency group called the Committee on Foreign Investment in the U.S., or CFIUS, that checks for security implications of foreign purchases of U.S. companies.

Huawei doesn’t have knowledge of the national-security review, Bill Plummer, a U.S. spokesman, said in an interview.

“If government approval of the transaction is somehow contingent on an agreement to restrict purchase of equipment from any vendor based on the flag of heritage, then it is a sad day for free and open global trade and it does nothing to secure the network,” Plummer said. “Everyone is global and every company faces the same cyber challenges.”

U.S. agencies previously have reached security agreements in telecommunications mergers, most recently for the March 13 approval of Deutsche Telekom AG (DTE)’s combination of its T-Mobile USA Inc. unit with MetroPCS Communications Inc. (PCS:US), based in Richardson, Texas. Bonn-based Deutsche Telekom agreed to tell the U.S. what equipment it has and inform the government if new vendors are used, according to documents released by the FCC.

Softbank buys base band units and antenna systems from Huawei and ZTE for its fourth-generation mobile network in Japan. Alcatel-Lucent and Ericsson AB provide the core network.

Clearwire Gear

Clearwire uses gear from Huawei at the edge of its network, and its core network is supplied by domestic vendors such as Cisco Systems Inc. and Ciena Corp. (CIEN:US), John Saw, the company’s chief technology officer, said in October. Clearwire is “materially reducing” Huawei’s presence in its network that delivers high-speed wireless service, Saw said.

John Taylor, a spokesman for Sprint’s Washington office, declined to comment, as did Mark Wigfield, an FCC spokesman. Dean Boyd, a spokesman for the Justice Department. Softbank declined to comment, and Holly Shulman, a Treasury Department spokeswoman, said the department doesn’t discuss CFIUS cases.

To contact the reporters on this story: Elizabeth Wasserman in Washington at ewasserman2@bloomberg.net; Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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