According to a Financial Times report, Chinese infrastructure giant Huawei has aims of becoming a mobile broadband equipment supplier to Sprint, but it needs to get the thumbs up from U.S. government officials to make the deal happen. (FT article requires registration, but click here for a Reuters summary of the story.) Huawei’s biggest obstacle is its lack of transparency due to its privately held status and its former or current — depending on whom you ask — relationship to the People’s Liberation Army, which has made Washington suspicious of motives other than business in the U.S.
The government killed Huawei’s attempt to buy 3Com in 2008 for security concerns, but Huawei has made inroads selling telecom gear in the States. Clearwire selected Huawei as one of three WiMax infrastructure supplier, and Cox Communications tapped the Chinese company as its sole CDMA radio supplier. The FT article doesn’t say what kind of mobile broadband equipment Huawei is keen on selling to Sprint, but because of Sprint’s status as the third-largest mobile operator, the government is more concerned about this sale than past ones. According to the Times:
In order to make serious inroads in the US the company may have to consider dramatic concessions to prove it is transparent, including going public on a US or Hong Kong exchange, shaking up its management or creating a US company that is independent of Chinese control. Under US law, an inter-agency panel called the Committee on Foreign Investment (Cfius) can block takeovers of sensitive US assets by foreigners on national security grounds. Though it does not usually vet big contracts, technology and telecoms assets are considered especially sensitive.
Connected Planet’s take,
Kevin Fitchard:
Since when did the government start vetting Huawei equipment sales? Not only has Huawei sold to Cox and Clearwire unimpeded, but it competed for the T-Mobile 3G network contract, and though it didn’t win the deal, Huawei maintains it lost out because Ericsson and Nokia Siemens Networks undercut it on price, not because of government interference.
There’s not much to the argument that Sprint’s size provides the cutoff point either. Technically Huawei is already a mobile broadband supplier to Sprint. Sprint’s the majority investor in Clearwire, and Clearwire basically is the 4G network for Sprint. Then there’s the matter of what equipment exactly Huawei would sell. Sprint already has its CDMA suppliers locked down, and it’s committed for the time being to WiMax for 4G. Unless there’s any truth to the rumors Sprint has a covert long-term evolution project in the works, there’s probably not a lick of wireless equipment Sprint is interested in buying directly from Huawei, unless we’re talking about IP routers or core gateways.
If there is any truth to this story, I suspect it has more to do with a potential acquisition of one of Sprint’s vendors than with Sprint itself. And the only vendor that makes sense is Motorola. Motorola feeds a portion of every single one of Sprint’s networks from CDMA to iDEN to WiMax, and Huawei may be contemplating a purchase or investment in one or all of those divisions to give it better footing in the U.S. and Americas markets. You read the headlines: Motorola is splitting it up, and those pieces have to go somewhere. Perhaps it’s just a coincidence of timing, but one thing is definite: if Huawei were to buy a piece or all of Motorola Networks, multiple branches of the government are going to get involved, just like they did when Alcatel bought Lucent Technologies and when Huawei tried to buy 3Com.
That’s our take on this. Let us know what you think in the comments section below:
When Sprint sold the first 8-bit packet switch to the former USSR in 1990, the company had to jump through hoops to ensure the U.S. government that we weren’t giving away sensitive technology (funny to think of an 8-bit packet switch as that big a deal, even then). The Soviets had other requirements, namely inclusion of Russian partners in the joint venture set to launch X.25 service. Several Russian proto-business types visited Sprint’s office in Reston, VA, where I worked at the time, including a chap from — and I’m not making this up — the Moscow Circus. Why he was involved, only God or Lenin knows, but to this day I always think of the circus when I read of governments intervening in international business deals.
As for China, they’re already investing in every imaginable type of U.S. business, and who can blame them? Considering all the U.S. dollars they’ve sucked up, and whose long term value they likely question, the desire to hold something tangible is perfectly understandable.