Pedestrians pass in front of a T-Mobile US Inc. store in New York. (Photographer: Jeenah Moon/Bloomberg)

Sprint Deal Needs Scrutiny Over China Ties, Lawmakers Say

(Bloomberg) -- U.S. lawmakers plan to pressure the Trump administration to closely scrutinize T-Mobile US Inc.’s planned purchase of Sprint Corp., arguing the acquisition poses a threat to American security because the owner of Sprint has ties to Chinese telecommunications company Huawei Technologies Co.

A draft letter to Treasury Secretary Steve Mnuchin, who leads a U.S. national security review of the deal, is to be sent next week and is being circulated for signatures among lawmakers in the House by congressional critics of the deal, according to a copy obtained by Bloomberg News.

"Recognizing that these companies operate as subsidiaries of foreign-owned firms -- one of which maintains long-standing close ties with Chinese state-influenced entities -- a full and robust national security investigation is required," according to the letter.

The $26.5 billion merger of the No. 3 and 4 wireless carriers needs approval from the Committee on Foreign Investment in the U.S., or CFIUS, which reviews foreign acquisitions of American businesses.

President Donald Trump could block the deal based on the panel’s recommendation. T-Mobile parent Deutsche Telekom AG will own 42 percent of the new company while Sprint owner SoftBank Group Corp., based in Japan, will have a 27 percent stake.

‘Great Partner’

Asked last week on Capitol Hill about CFIUS approval, Sprint Chairman Marcelo Claure said, “We’ve proven that we’re a great partner to the U.S. government and we will continue to be that great partner and there’s no change of ownership. It’s pretty much the same actors.”

Sprint said it has a record of complying with the National Security Agreement that’s been in place since SoftBank became its majority shareholder in 2013. That includes spending more than $200 million replacing network gear used by Clearwire, a company it acquired.

“Sprint is proud of our track record on NSA compliance and confident that the combined company will continue to make network security a top priority,” the carrier said in an emailed statement.

The House letter cites SoftBank’s work with Huawei, which has been branded a national security threat by the U.S. In September, SoftBank announced a joint effort with Huawei to demonstrate the potential uses of the next-generation wireless network known as 5G, according to the letter. In November, SoftBank signed an agreement with Huawei to implement 5G-based “smart service robots.”

"The Sprint, T-Mobile merger would increase telecommunications risks associated with third-party foreign entities, including Huawei, being utilized in the development of U.S. 5G infrastructure," according to the letter.

The draft also claims Sprint violated the 2013 security agreement that required it to remove Huawei equipment from its network.

"Three years later, Sprint under the control of SoftBank, confirmed Huawei equipment remained in use in their networks in contravention of the 2013 agreement," it says.

The letter comes as the House and Senate are negotiating legislation aimed at strengthening U.S. national security-based reviews by CFIUS. The Trump administration has said it broadly supports strengthening the panel’s authority.

©2018 Bloomberg L.P.

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