US national-security clearance of Softbank-Sprint deal hits Huawei

PUBLISHED : Friday, 31 May, 2013, 12:00am
UPDATED : Friday, 31 May, 2013, 4:54am

The US national security clearance of SoftBank Corp's US$20.1 billion acquisition of Sprint Nextel Corp imposes the first restrictions on a third-party supplier over claims of Chinese spying.

Tokyo-based SoftBank and Sprint on Wednesday said they had been notified their proposed deal was cleared by the US Committee on Foreign Investment, an interagency group that vets non-US acquisitions.

The deal needs one more US regulatory clearance.

The companies earlier gave assurances they would limit use of telecommunications equipment made by Huawei Technologies, named in a congressional report as a cybersecurity risk to US companies because of ties to the Chinese military.

SoftBank and Sprint, as a condition of the security clearance, agreed the US could compel Sprint to remove "certain equipment" and approve future vendors, according to a filing by Sprint.

Huawei and ZTE Corp, China's largest phone-equipment makers, have disputed allegations in an October report by the House Intelligence Committee that their expansion may boost US exposure to cyberattacks and spying.

President Barack Obama plans to discuss cybersecurity when he meets President Xi Jinping on June 7 and 8 in California.

Japanese mobile carrier SoftBank and Sprint's wireless partner, Clearwire Corp, use Huawei equipment, which includes base stations, servers, routers and switches.

SoftBank and Sprint have said they will not integrate Huawei equipment, according to Mike Rogers, the chairman of the House Intelligence Committee.

The panel's report in October recommended that US companies doing business with Huawei and ZTE find another vendor.

"It sets a precedent," said Darrell West of Brookings Institution, a Washington-based policy group. "Once you've established these rules for one business, they may try and do that elsewhere."