Concerns over alleged security issues prompted Sprint Nextel (NYSE:S) and Softbank to promise a U.S. lawmaker that Sprint's network will not use network equipment from China's Huawei, which is also being targeted by Canadian lawmakers considering new regulations on foreign wireless suppliers perceived as security risks.
Mike Rogers, (R-Mich.), chairman of the House Intelligence Committee, confirmed in a statement that Softbank and Sprint have reassured him that once their merger is complete, they will not integrate Huawei equipment into Sprint's wireless network. Further, they promised to make "mitigation efforts to replace Huawei equipment in the Clearwire (NASDAQ:CLWR) network," said Rogers.
Sprint is the majority owner of Clearwire and has proposed to buy the 50 percent of Clearwire that it does not already own.
The Clearwire part of the agreement with Rogers is particularly noteworthy given that as recently as October 2012, Clearwire received U.S. government approval to deploy Huawei gear in its planned TD-LTE network. At that time, Clearwire CTO John Saw told FierceWireless that Samsung and Huawei base stations are deployed at the edge of the network, while the core network equipment is being provided by domestic vendors Cisco and Ciena.
Rogers added he expects Sprint and Softbank to make the same assurances before any approval of the merger deal by the Committee on Foreign Investment in the United States, a government body reviewing the national security implications of Softbank's bid to buy 70 percent of Sprint for $20 billion.
"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," Bill Plummer, Huawei spokesman, told Bloomberg. "Everyone is global, and every company faces the same cyber challenges."
In October, Congressman Rogers' House Intelligence Committee released a report recommending the United States block acquisitions and mergers involving Huawei and fellow Chinese vendor ZTE. The report also recommended the U.S. government and U.S. companies avoid using equipment from the two Chinese companies due to fears their involvement in critical infrastructure "could undermine core U.S. national-security interests."
Softbank's LTE network in Japan employs equipment from multiple suppliers, including Huawei and ZTE. Softbank has said it does not use Huawei equipment in any of its core network infrastructure, however.
Huawei is also facing great scrutiny in Canada, where the federal government is pondering rules to govern telecom network gear from foreign suppliers, according to Bloomberg. Though no one company is reportedly being targeted by the review plan, Huawei is already barred from bidding on telecommunications contracts for Canada's government networks.
However, Huawei is a network vendor for Canadian operators Wind Mobile, Telus and BCE, the nation's largest phone company.
"We will continue to work transparently with customers and the federal government to address any issues necessary," Huawei spokesman Scott Bradley said in an e-mail to Bloomberg.
In related news, United States recently created a new cyber-espionage review process for U.S. government technology purchases, barring NASA and the Justice and Commerce Departments from buying IT systems unless they are approved by federal law enforcement officials. The process specifically targets gear produced, manufactured or assembled by one or more entities that are owned, directed or subsidized by China.
Though Huawei has been impacted by restrictions on it in certain countries, the Chinese vendor has been running neck and neck with infrastructure market leader Ericsson (NASDAQ:ERIC). Huawei is expected to gain business from select LTE deployments in Europe during 2013, thanks to its aggressive pricing, and is poised to attract substantial business from China's TD-LTE rollouts as well.
For more:
- see this Mike Rogers statement
- see this Bloomberg article and this article
- see this New York Times article (sub. req.)
- see this CNN article
- see this CNET article
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