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Business deals

T-Mobile and Sprint weigh dropping Huawei, ahead of US merger clearance

Parents Deutsche Telekom and SoftBank pressed to stop using equipment

T-Mobile and Sprint shares were both down 1.2 percent on Dec.14   © Reuters

WASHINGTON/NEW YORK (Reuters) -- T-Mobile US and Sprint expect their merger to be approved by a U.S. national security panel as early as next week, after their respective parent companies said they would consider curbing their use of equipment from China's Huawei Technologies, people familiar with the matter told Reuters.

U.S. government officials have been pressuring T-Mobile's German majority owner, Deutsche Telekom AG, to stop using Huawei equipment, the sources said, over concerns that Huawei is effectively controlled by the Chinese state and its network equipment may contain "back doors" that could enable cyber espionage, something which Huawei denies.

That pressure is part of the national security review of T-Mobile's $26 billion deal to buy U.S. rival Sprint, the sources said.

The Committee on Foreign Investment in the United States (CFIUS) has been conducting a national security review of the Sprint deal, which was announced in April. Negotiations between the two companies and the U.S. government have not been finalized and any deal could still fall through, the sources cautioned.

T-Mobile and Sprint shares were both down 1.2 percent on Friday.

Like all major U.S. wireless carriers, T-Mobile and Sprint do not use Huawei equipment, but their parent companies use Huawei gear in overseas markets.

Sprint's parent, SoftBank Group, plans to replace 4G network equipment from Huawei with hardware from Nokia and Ericsson, Nikkei reported on Thursday, without citing sources.

Deutsche Telekom, Europe's largest telecoms company, on Friday said it was reviewing its vendor plans in Germany and other European markets where it operates, given the debate on the security of Chinese network gear.

Sprint, T-Mobile, Deutsche Telekom, SoftBank and CFIUS declined to comment.

Huawei has said the security concerns are unfounded. Tensions have been heightened recently by the Dec. 1 arrest of Huawei's chief financial officer, Meng Wanzhou, in Canada for possible extradition to the United States.

U.S. prosecutors accuse Meng of misleading multinational banks about Iran-linked transactions, putting the banks at risk of violating U.S. sanctions. Meng, who is the daughter of Huawei's founder, has said she is innocent.

The Justice Department and Federal Communications Commission must also approve the proposed deal between the third and fourth largest U.S. wireless carriers. T-Mobile previously said it expected the deal to close in the first half of 2019.

The agreement was reached after four years of on-and-off talks that set the stage for the creation of a company that would compete more favorably with the top two wireless players, Verizon Communications Inc and AT&T Inc.

The United States has been using its influence to pressure companies around the world to shed Huawei as a supplier, even when it comes to their overseas operations, as it seeks primacy over China in 5G wireless technology. Huawei is the world's biggest network equipment maker ahead of Ericsson and Nokia.

New Zealand and Australia have stopped telecom operators using Huawei's equipment in new 5G networks because they are concerned about possible Chinese government involvement in their communications infrastructure.

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