Sprint Nextel (NYSE:S) and Japanese suitor Softbank told lawmakers they will not use gear from Chinese vendor Huawei in Sprint's network, according to a senior U.S. lawmaker involved in intelligence activities.
The comments from the lawmaker, Rep. Mike Rogers (R-Mich.), came after the Wall Street Journal reported that the U.S. government wants to be able to review Sprint's network equipment purchases as a condition of Softbank's proposed $20.1 billion purchase of 70 percent of Sprint. The action is likely an attempt by the government to block Sprint from buying equipment from Huawei and fellow Chinese vendor ZTE. Rogers is the chairman of the House Permanent Select Committee on Intelligence.
"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 in a statement. "I expect them to make the same assurances before any approval of the deal in the CFIUS process." CIFUS refers to the Committee on Foreign Investment in the United States, a group led by the Treasury Department, which must approve the deal.
Sprint declined to comment.
Rogers said Sprint and Softbank also agreed to eventually replace the Huawei equipment used by Clearwire (NASDAQ:CLWR), which Sprint wants to purchase. Clearwire has said that Huawei's gear is deployed at the edge of Clearwire's network, while its core network equipment is being provided by domestic vendors Cisco and Ciena. Clearwire picked Huawei as one of its RAN vendors after getting approval from the U.S. government.
The Journal reported that, according to unnamed sources familiar with the matter, there has been no serious discussions of requiring Clearwire to decommission its existing Huawei equipment.
A government report last year found that Huawei and ZTE pose a security risk because their network equipment could be used for espionage. The report, from the House intelligence committee, recommended the U.S. block acquisitions and mergers involving the two firms and also recommends that the U.S. government and U.S. companies avoid using equipment from the two Chinese companies. Huawei and ZTE vigorously denied the charges, which they said were unfounded and motivated by politics. They said they are not connected to the Chinese government or military and that operators around the world, including those in Western Europe, use their network gear.
"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," Huawei spokesman William Plummer told Bloomberg. "Everyone is global and every company faces the same cyber challenges."
For more:
- see this NYT article
- see this Bloomberg article
- see this WSJ article (sub. req.)
- see this FT article (sub. req.)
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