News Column

Sprint Shares Advance on Merger-related News

March 29, 2013

Mark Davis, The Kansas City Star


Sprint Nextel Corp. appears to be clearing a path for its pending mergers by addressing federal concerns about using Chinese-made network equipment.

On Thursday, Bloomberg News reported that Sprint told a U.S. House member it wouldn't tap Huawei Technologies Co. as a supplier. Huawei and ZTE Corp., China's two large telecom equipment makers, have been the subject of federal concerns about possible electronic spying.

Huawei already is a supplier for Sprint's potential acquirer, Tokyo-based SoftBank Corp., and Sprint's network partner Clearwire Corp. Sprint is seeking to buy the 49 percent of Clearwire it doesn't already own even as SoftBank buys control of Sprint.

Sprint's reported pledge to avoid the Chinese supplier could be "priming the pump for action" in Washington's review of its two merger deals, said Bill Ho, a telecommunications industry analyst.

Ho said Sprint could simply pledge to use its current suppliers of network infrastructure -- Alcatel-Lucent, Ericsson and Samsung -- as a way to quell concerns about the Chinese manufacturers.

Sprint declined to comment on the news about China.

Shares of the Overland Park company gained 17 cents, a 2.8 percent advance, and closed at $6.21. It was the stock's highest closing price since 2008.

According to Bloomberg News, U.S. Rep. Mike Rogers, head of the House intelligence committee, was the recipient of Sprint's pledge.

"I have met with SoftBank and Sprint regarding this merger and was assured they would not integrate Huawei into the Sprint network and would take mitigation efforts to replace Huawei equipment in the Clearwire network," Rogers told Bloomberg.

He said he also expected the companies to make the same assurances before any approval of the deal by U.S. agencies reviewing the mergers.

The House committee previously issued a report that said the federal government should prevent deals that would include Huawei and ZTE equipment. The report had said the companies' equipment could provide an opening for Chinese intelligence services to U.S. telecommunications networks.

A Huawei spokesman told Bloomberg that a federal demand for such a pledge would be unwelcome.

"If government approval of the transaction is somehow contingent on an agreement to restrict purchase of equipment from any vendor based on the flag of heritage, then it is a sad day for free and open global trade, and it does nothing to secure the network," Bill Plummer told Bloomberg. "Everyone is global, and every company faces the same cyber challenges."

A Clearwire official, however, said the company was "materially reducing" Huawei's role in its network, Bloomberg reported.

Separately, Clearwire said in a public filing that it will draw again on a financing program that is part of Sprint's merger agreement with it. The action provides Clearwire $80 million for April and further links the two companies.

Clearwire's shareholders have not yet voted on the deal, and some oppose its terms.

Source: (c)2013 The Kansas City Star (Kansas City, Mo.). Distributed by MCT Information Services.

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