Sprint's ties to Huawei may threaten the wireless carrier's proposed merger with T-Mobile, Bloomberg reports, citing a copy of a letter signed by various House Representatives meant to be sent to Treasury Secretary Steve Mnuchin next week. The authors of the letter are still seeking additional signatures to raise concerns about relations between Sprint and China's largest smartphone manufacturer which the U.S. government effectively prevented from doing large-scale stateside business on numerous occasions, most recently this January when it pressured AT&T into dropping its planned retail partnership over the Mate 20 series of Android smartphones. The letter has hence been circulating the House in recent days but the number of signatures it amassed remains unclear.
The lawmakers in question demand a "full and robust national security investigation" into Sprint, its Japanese parent SoftBank, and their dealings with Huawei. As both Sprint and T-Mobile are owned by overseas entities, their proposed $26.5 billion consolidation must be greenlit by the Treasury Department's Committee on Foreign Investment in the U.S., in addition to needing approval from all other regulators that have jurisdiction over big business tie-ups in wireless – the Department of Justice, Federal Communications Commission, and the Federal Trade Commission. President Trump also has the powers to personally block the deal and is likely to consult with CFIUS over the matter later this year.
Both T-Mobile and Sprint claim their merger would create jobs and additional competition in the wireless industry despite reducing the number of direct rivals in the sector, pointing to 5G as a segment in which the two companies can't directly take on Verizon and AT&T on their own, which goes against their previous sentiments, as previously pointed out by former FCC Chairman Tom Wheeler and a number of industry analysts. Should the tie-up be approved, T-Mobile parent Deutsche Telekom would end up with 42-percent of the combined entity, whereas SoftBank would be left with a 27-percent stake, with the remaining ownership being publicly traded.
Sprint said it's confident its merger won't be blocked on national security grounds. The letter that will soon end up on Mr. Mnuchin's desk specifically mentions SoftBank's collaborative efforts with Huawei on 5G technologies which the duo formalized with a cooperation agreement signed last November. While Sprint agreed to eliminate Huawei-made equipment from its operations in 2013 so that SoftBank is allowed to buy it, the mobile service provider violated that agreement, the letter alleges. Huawei's long history of issues in the U.S. is hence set to receive yet another episode in spite of the company's frequent protests that its ties to Beijing are overblown and national security risk accusations completely baseless.