U.S. Pressures Sprint, SoftBank to Ditch Huawei

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Sprint and SoftBank are prepared to promise that if the $20 billion buyout is approved, they will rid their systems of telecommunications gear made by Chinese manufacturer and perceived espionage threat Huawei Technologies Ltd. and give U.S. authorities – including national security officials -- unprecedented visibility into any future network improvements.

Federal scrutiny of the proposed takeover of Sprint Nextel by Japanese tech behemoth SoftBank has gone well beyond the typical discussions of competition, pricing and consumer choice, burrowing right down into the heart of the network.

According to published reports, Sprint and SoftBank are prepared to promise that if the $20 billion buyout is approved, they will rid their systems of telecommunications gear made by Chinese manufacturer and perceived espionage threat Huawei Technologies Ltd. and give U.S. authorities – including national security officials -- unprecedented visibility into any future network improvements.

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The arrangement would include all of Sprint’s U.S. operations as well as networks used by Arlington, Texas-based Clearwire Corp., a discount wireless carrier and Huawei customer Sprint is currently looking to acquire.

Rep. Mike Rogers (R-Mich), chairman of the House intelligence committee and a frequent critic of the use of Chinese-made technology in U.S. networks, tell the New York Times he’s been assured no Huawei equipment would be used in a joint Sprint-SoftBank system.

“I expect them to make the same assurances before any approval of the deal.” Rogers said, adding that he will “continue to look for opportunities to improve the government’s existing authorities to thoroughly review all the national security aspects of proposed transactions.”

Rogers has been at the forefront of accusations leveled at Huawei ever since a report on CBS’s 60 Minutes late last year detailed suspicions of the China-based telecommunications company’s alleged theft of intellectual property and potential threat to U.S. national security.

“If I were an American company today, and I’ll tell you this as the chairman of the House Permanent Select Committee on Intelligence, and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers’ privacy, and you care about the national security of the United States of America,” Rogers said at the time.

In a written petition to the FCC to restrict SoftBank’s Sprint purchase, the Communications Workers of America union cited both SoftBank’s and Clearwire’s close relationships with Huawei and fellow Chinese networking vendor ZTE Corp. and said the Chinese firms “pose considerable security risk to the United States.”

“Huawei and ZTE are helping to build Softbank’s next generation 4G wireless network in Japan,” union officials wrote. “Huawei also helped build wireless networks for Clearwire and Clearwire recently announced that it has selected Huawei as a major vendor in the upgrade of its wireless network.

“This transaction could strengthen the position of a Chinese equipment manufacturer in the U.S. market, further eroding the remaining jobs of U.S. equipment makers and installers,” the CWA added.

In response, Sprint and SoftBank officials argued that SoftBank does “not use Huawei equipment in their core network infrastructure. Huawei equipment is used only at the edge of the network, not for core switching and routing functions” and poses no intelligence gathering or security risk.

“There is no need for the FCC to engage in its own inquiry concerning national security issues and impose its own conditions,” Sprint officials argued further. “Not only is there no evidence of any national security threat that might arise from the proposed transaction, but the expert authorities on national security issues … already are engaged with Sprint and SoftBank on these questions.”

Huawei spokesman Roland Sladek told the Times that the Chinese firm “meets the highest standards of network security, is a trusted vendor to 45 of the world’s top 50 network operators and is an active investor and employer in the U.S.”

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