SoftBank's Sprint Buy a Potential 'Bitter Blow' to Huawei

Sprint will likely snub Huawei’s network equipment now that the U.S. government has suggested possible espionage concerns in using the China-based company’s gear and the pending merger between Sprint and Japan-based SoftBank isn’t helping Huawei.

SoftBank announced earlier this month it plans to acquire 70 percent of Sprint for a little more than $20 billion. America’s third-largest wireless carrier has said it will pay close attention to the warnings about China-based equipment manufacturers such as Huawei and ZTE specifically this month’s report from the House Permanent Select Committee on Intelligence that encourages U.S. companies to avoid buying gear from the companies. Before that, Sprint excluded Huawei from bidding on its network upgrade due to similar concerns from the U.S. Commerce secretary.

Sprint is a big supplier to the U.S. government and that aside, I wouldnt put in any equipment that would raise security concerns, The Financial Times quoted Sprint CEO Dan Hesse as saying. While Huawei is a supplier for SoftBank, that company’s CEO says he is well aware of the U.S. government’s concerns and he will respect the outcome.

Huaweis future as an important supplier to SoftBank in Japan is at risk with SoftBanks move to buy a majority share of Sprint,” noted Rich Karpinski, senior analyst with Yankee Group. “As a U.S. operator, Sprint is under notice from the U.S. government that deployment of Huawei infrastructure means no future U.S. government business. … SoftBank will be forced to focus future equipment spending on non-Chinese suppliers. For Huawei, this will be a bitter blow.”

Karpiniski says Huawei made a real play for Sprint’s LTE build before the U.S. government stepped in. In addition, the China-based company is in danger of losing business with Clearwire, which Sprint now intends to buy in full (the company currently owns about half of Clearwire). Huawei supplies multi-mode base stations to Clearwire as the broadband provider shifts from WiMAX to TD-LTE.

“The U.S. government has put Huawei in an untenable position,” Karpinski added. “The company must prove a negative: That they are not a threat. So far, U.S. officials and politicians have cast aspersions that Huawei might be a cyberthreat, but with no hard evidence of an actual problem. It is not fair, but it remains a political reality that is unlikely to change without major shifts in China and the United States shifts far from Huaweis control.”