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Sprint, Softbank to swear off Huawei kit as condition of merger

Will bow to US government spying concerns

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A US Congressman has said that Sprint and its Japanese suitor Softbank have both pledged not to use equipment manufactured by China's Huawei in Sprint's wireless network, a move that could help the companies clear a hurdle in their planned merger.

Representative Mike Rogers, chairman of the House Intelligence Committee, told The New York Times on Thursday that both companies had voluntarily agreed to shun Huawei equipment as they build out Sprint's existing network.

Furthermore, Rogers said, the companies also said they would remove Huawei equipment currently in use by Clearwire, a high-speed wireless data provider that Sprint is in the process of acquiring.

Softbank, which operates a variety of wired and wireless voice and data services in Japan, offered $20.1bn for a 70 per cent stake of Sprint in October. But before that deal can go through, it must first pass the scrutiny of a variety of US government agencies that oversee national security concerns.

One such issue of late has been the use of networking equipment from Chinese manufacturers, including Huawei and ZTE. Because of these companies' close ties to the Chinese government and military, many in the US security community believe that their equipment could be used to facilitate espionage.

In October, the House Intelligence Committee issued a report stating that Huawei and ZTE had "failed to alleviate serious concerns" during the Committee's security investigations, and that US businesses should avoid using the Chinese firms' gear.

Huawei slammed that decision as "protectionism" and said Congress' fears over spying were groundless, but the US government's stance has only grown stricter since.

On Tuesday, President Obama signed into law a new appropriations bill that, among other provisions, forbids government agencies from buying any technology from companies "owned, operated or subsidized" by China – a clear dig at Huawei and ZTE.

The Wall Street Journal reported on Thursday that Congress was seeking similar oversight over networking equipment purchases as a condition for approving the Softbank-Sprint merger. The two companies' voluntary agreement to forego Chinese equipment may allow the combined firm to avoid such scrutiny.

The companies' willingness to pull existing Huawei equipment from the Clearwire network is particularly telling, given that Clearwire itself received approval to buy Huawei kit as recently as October.

For its part, Huawei pointed out that its networking products are used in nearly 150 markets, including most of Europe, and it repeated its earlier criticism of any policy that would lock it out of the US market.

"The adoption of such a policy would seem little more than a market-distorting political or protectionist exercise," a Huawei spokesman told the Journal.

Rogers, on the other hand, told The New York Times that he was "pleased" with Thursday's announcement, but noted that Softbank and Sprint aren't out of the woods yet. They'll next have to face the Committee on Foreign Investments in the United States, a body that oversees national security concerns specific to business transactions, where Rogers says he expects them to repeat their pledge to reject Chinese kit. ®

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