US politicians are expected to demand the Trump administration conduct a robust investigation of a planned merger between T-Mobile US and Sprint, because of perceived links between the latter’s parent, SoftBank, and China.
A draft letter due to be sent to treasury secretary Steve Mnuchin, who is leading a national security review of the merger, states it must be closely scrutinised because both companies are “subsidiaries of foreign-owned firms, one of which maintains long-standing close ties with Chinese state-influenced entities”.
The reference relates to 5G development work SoftBank undertook with Chinese vendor Huawei in 2017, Bloomberg reported.
In September 2017, for example, SoftBank teamed with Huawei to demonstrate potential 5G use cases for its enterprise partners, as part of a push to launch the technology in 2020.
“The Sprint, T-Mobile merger would increase telecommunications risks associated with third-party foreign entities, including Huawei, being utilised in the development of US 5G infrastructure,” the politicians wrote. The letter also noted Sprint violated a 2013 security agreement that required it to remove Huawei equipment from its network.
Currently, the $26.5 billion merger of the number three and four operators is waiting for approval from the Committee on Foreign Investment in the US (CFIUS).
Commenting on the process last week, Sprint chairman Marcelo Claure (pictured, left) said the operator had “proven that we’re a great partner to the US government” and noted there would be “no change of ownership” as a result of the deal. If approved, T-Mobile parent Deutsche Telekom will own 42 per cent of the new company and SoftBank 27 per cent.
Last month T-Mobile and Sprint laid out their arguments for the merger as they made their first formal bid to win clearance for the deal from the Federal Communications Commission.
Previously, the US Department of Justice opened an investigation into the potential effect on MVNOs, Reuters reported.
The letter comes at a time of heightened scrutiny of Chinese companies by US officials (with ZTE the most high-profile example) and during a trade battle between the countries.
In April, The US Department of Justice opened an investigation into whether Huawei violated US restrictions on trade with Iran.
For years, the company had been the subject of suspicion from US officials, who accused it of spying and deemed it a threat. Political pressure blocked Huawei’s bid to secure smartphone supply deals with US operators AT&T and Verizon, while in March retailer BestBuy also dropped the company’s devices.