T-Mobile & Sprint hope Huawei pledge will gain merger approval

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T-Mobile USA and Sprint hope that pledges by their parent companies to stop using Huawei’s telecommunications equipment in their other mobile operators’ infrastructure will pave the way for a $26 billion merger to go ahead.

Huawei has effectively been frozen out of the US market, so neither T-Mobile nor Sprint use the Chinese firm’s equipment in their infrastructure, but other operators owned by Deutsche Telekom and Japan’s Softbank do.

Australia has banned its operators from using Huawei equipment in their 5G rollouts on national security grounds, while it has been suggested that the US has been placing pressure on its allies – including Germany and Japan - to take similar action.

T-Mobile Sprint

Reports last week suggested that Deutsche Telekom and Japan’s Softbank were reconsidering the role of Huawei kit across their portfolio and Reuters says the two firms believe this could lead the proposed merger to be approved by the Committee on Foreign Investment in the United States (CFIUS) as early as this week. All parties involved reportedly declined to comment.

The transaction has plenty of implications for the US domestic market, with the number of major players reduced from three to four. The two operators have appealed to regulators by claiming the merger is the only way to rapidly create a truly national 5G network, thanks to T-Mobile’s spectrum holdings.

But this latest development could have ramifications well beyond the US.

The main basis for these security fears is a perception that Huawei is linked to the Chinese government and that the use of the company’s equipment risks the possibility of backdoors that could be used for espionage. These fears are heightened by 5G because of the sensitive information these networks will carry.

Huawei has repeatedly denied such accusations, pointing out that it works with security agencies around the world and that it sells products to more than 500 operators in 170 countries without issue. This includes the UK, where BT, EE, Vodafone and Three are all customers.

There will be little demand among operators for barriers to the use of Huawei kit as this would reduce choice, hinder innovation and increase costs. Last month, Huawei revealed it had shipped more than 10,000 5G base stations outside China and had signed 22 commercial 5G contracts with foreign operators.