Exclusive: T-Mobile, Sprint see U.S. security approval for deal after Huawei concessions-sources

WASHINGTON/NEW YORK (Reuters) – T-Mobile US Inc and Sprint Corp 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.

FILE PHOTO: People walk past a Huawei shop in Beijing, China, December 11, 2018. REUTERS/Thomas Peter/File Photo

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 some Huawei gear in overseas markets.

Sprint’s parent, SoftBank Group Corp, 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.

Huawei has said the security concerns are unfounded. Tensions have been heightened by the arrest of Huawei’s chief financial officer in Canada for possible extradition to the United States.

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

The Justice Department and Federal Communications Commission must also approve the proposed deal. T-Mobile previously said it expected the deal to close in the first half of 2019. 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.

(This story corrects to show U.S. wireless carriers do not use Huawei equipment but are not banned from doing so)

Reporting by Greg Roumeliotis and Liana Baker in New York, Diane Bartz in Washington; Writing by Chris Sanders; Editing by Bill Rigby

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