U.S. Markets close in 5 hrs 51 mins

Huawei Ties Cited by Skeptics of T-Mobile's Purchase of Sprint

Todd Shields

(Bloomberg) -- Allegations against Huawei Technologies Co. justify a close look by Congress into T-Mobile US Inc.’s proposed $26.5 billion purchase of Sprint Corp., according to former U.S. officials on a conference call with reporters arranged by a group that declined to disclose its backers.

If the deal is approved, the merged company’s parent corporations in Europe and Japan could buy gear from telecommunications equipment maker Huawei, one of the officials said. The Chinese company’s been called a security risk by U.S. officials who have accused it of sanctions violations and trade-secret theft.

“These global multinationals -- they shouldn’t have more resources to go out and buy Huawei,” Andrew Holland, chief operating officer for the policy group American Security Project and a former aide to Senator Chuck Hagel, said on a conference call organized by an entity called Protect America’s Wireless.

Other participants on Thursday’s call by Protect America’s Wireless included Brad Blakeman, a former aide to President George W. Bush, and Bishop Garrison, a U.S. Army veteran who is interim director of the Truman National Security Project, a membership group of soldiers and civilians that says it defends free people and just societies.

Call participants declined to disclose donors for Protect America’s Wireless, with one participant -- David Wade, a former State Department official -- saying that “all of our funding sources are domestic.”

The combination of the third-and fourth-largest U.S. mobile providers needs approval from the Federal Communications Commission and the Justice Department’s antitrust division.

T-Mobile Chief Executive Officer John Legere and Sprint Chairman Marcelo Claure are to testify before a Democratic-controlled House panel on Feb. 13. While members of Congress don’t have a say on mergers, they do play a role in overseeing the officials who vet deals.

Deal critics include policy groups and Dish Network Corp., which owns airwaves it intends to use for mobile service. They say the deal risks reducing competition, because the merging companies have shaken up the industry with lower prices. T-Mobile and Sprint say they will be a stronger competitor to larger AT&T Inc. and Verizon Communications Inc.

The Committee on Foreign Investment in the U.S., or Cfius, which scrutinizes foreign investments for security concerns, has cleared the transaction, the companies said in a joint statement Dec. 17.

Cfius reviewed the deal because T-Mobile and Sprint are owned by foreign companies: Deutsche Telekom AG, the parent of T-Mobile, and SoftBank Group Corp., which owns Sprint. Deutsche Telekom, based in Bonn, would own 42 percent of the new company, while Tokyo-based SoftBank would own 27 percent.

Germany and other European governments have been weighing whether to place restrictions on the use of Huawei equipment over concerns that Chinese intelligence could use it to spy on other countries, fears the company has dismissed.

The U.S. too is bringing pressure, and its Congress last year banned government agencies from buying Huawei gear. The FCC is considering a ban on spending some subsidy funds on such equipment, and the administration of President Donald Trump is said to be preparing an executive order to give greater authority to the Commerce Department to review products and purchases by companies connected to adversarial countries, including China.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.