T-Mobile said to near US national security nod for Sprint deal despite Huawei concerns

  • Critics of the deal have raised concerns about the ties between T-Mobile and Sprint’s parent companies and Chinese telecoms giant Huawei
PUBLISHED : Monday, 17 December, 2018, 11:38am
UPDATED : Monday, 17 December, 2018, 11:38am

T-Mobile US Inc. is poised to win US national security approval for its takeover of Sprint Corp., according to three people familiar with the matter, clearing one of the regulatory barriers to the merger of the two wireless carriers.

US officials are on track to sign off on the deal as soon as next week, once they complete an agreement to address national security concerns over the combination, said the people, who said they weren’t authorised to speak publicly because the negotiations are confidential.

The approval by the Committee on Foreign Investment in the US, or Cfius, would move the No. 3 and No. 4 wireless providers in the US closer to consummating their US$26.5 billion tie-up. In addition to Cfius, the carriers need approval from the Federal Communications Commission and the Justice Department’s antitrust division.

The parties have an agreement in principle with Cfius, with final details still to be worked out, said one of the people. Timing of the approval could slip, but is still expected before the end of the year, the person said.

Critics of the deal have raised concerns about the ties between T-Mobile and Sprint’s parent companies and Chinese telecommunications giant Huawei Technologies Co., which is suspected by US officials of enabling espionage by Beijing. Huawei supplies Deutsche Telekom AG, which owns T-Mobile, and SoftBank Group Corp., the parent of Sprint.

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Deutsche Telekom, based in Bonn, will own 42 per cent of the new company, while Tokyo-based SoftBank will own 27 per cent.

Two of the people familiar said they weren’t aware of whether Huawei’s equipment was an issue in the Cfius review.

Reuters reported earlier on the timing of the approval and said US officials were pressuring Deutsche Telekom to stop using equipment made by Huawei.

Deutsche Telekom indicated Thursday it may drop Huawei from its list of network suppliers, saying it’s re-evaluating its purchasing strategy amid security concerns surrounding the Chinese company.

Deutsche Telekom did not immediately comment outside regular business hours. Sprint, T-Mobile and SoftBank declined to comment. A representative for Huawei did not immediately respond to a request for comment. Cfius does not comment on its reviews, which are confidential.

Huawei has long been a source of concern for US authorities, who worry that China’s government could employ so-called back doors in the company’s products to spy on their American customers. Cabinet officials, lawmakers and regulators have all raised the alarm, sometimes directly urging businesses to oppose deals with the company.

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Huawei is also grappling with a trio of investigations over alleged violations of US sanctions on Iran. The most serious, headed by the Justice Department, led to the December 1 arrest of Huawei Chief Financial Officer Meng Wanzhou during a stopover in Vancouver on her way to Mexico. Meng, a daughter of billionaire Huawei founder Ren Zhengfei, is considered part of China’s inner circle. The other two investigations are being run by the Commerce and Treasury departments.

The Trump administration’s concerns about Huawei were underscored earlier this year when it blocked Broadcom Inc.’s hostile takeover attempt of Qualcomm Inc. The US said Broadcom, which was based in Singapore and is now domiciled in the US, would underinvest in the chip maker, giving Huawei an edge in 5G technology.

Cfius is reviewing the deal because T-Mobile and Sprint are owned by foreign companies. The panel, which is led by the Treasury Department, is tasked with ensuring that foreign investment in American companies does not pose risks to national security. It pays particular attention to deals involving critical infrastructure like wireless networks.