Sprint Nextel (NYSE:S) CEO Dan Hesse would avoid using network equipment made by Huawei to stay in line with U.S. government concerns about the security threat that may be posed by the Chinese company.
"Sprint is a big supplier to the U.S. government and that aside, I wouldn't put in any equipment that would raise any security concerns," Hesse told the Financial Times as part of a round of interviews he gave with Softbank CEO Masayoshi Son to discuss Softbank's proposed deal to acquire 70 percent of Sprint for $20.1 billion.
As the Sprint/Softbank deal moves forward in the regulatory approval process, some are indicating that Softbank's use of Huawei as an equipment supplier may draw scrutiny. Hesse and Son sought to dampen those concerns. "Sprint has crossed this bridge before and chose not to use equipment in our network that raised any security concerns, so we would always, regardless of the approval process before or after, be very sensitive to that issue," Hesse said.
Son also sought to play down the issue, noting that Huawei is a small supplier to Softbank. "I am aware in the U.S., the government is sensitively looking at it, and we understand national security," Son told Bloomberg. "So if the U.S. government decides, don't do it, we would comply." Son added that "only one of our group subsidiary companies using Huawei and ZTE. It's never our main investment."
About 10 percent of Softbank's capital expenditures go to Huawei and ZTE for equipment, according to data compiled by Bloomberg.
Huawei, for its part, said there is no issue. "It's a bit puzzling, given that Huawei has no involvement in the transaction, so it's not relevant," William Plummer, Huawei's vice president of external affairs and chief spokesperson in Washington, told Bloomberg TV.
A report from the House Permanent Select Committee on Intelligence recommended earlier this month that the United States block acquisitions and mergers involving Huawei and ZTE, and it also recommended that the U.S. government and U.S. companies avoid using equipment from the two Chinese companies. Huawei and ZTE pushed back aggressively against the report's conclusions, and have repeatedly said they do not pose a security threat and have no ties to the Chinese military or government. The Chinese government has also denied the claims and has suggested that the report could set back relations between the United States and China.
In the fall of 2010 Sprint reportedly decided to exclude Huawei and ZTE as vendors for its Network Vision project because of national security concerns. Sprint eventually chose Ericsson (NASDAQ:ERIC), Alcatel-Lucent (NASDAQ:ALU) and Samsung as its vendors.
For more:
- see this FT article (sub. req.)
- see this Bloomberg article
- see this Bloomberg video
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