Mobile Leadership Strategies

Now that SoftBank has officially announced it will be acquiring 70 percent of Sprint, Sprint needs to think about how it will continue to develop moving forward. And it looks like the carrier might decide to avoid using Huawei network equipment because of security concerns from the U.S. government.

According to the Financial Times, Sprint’s CEO Dan Hesse noted, “Sprint is a big supplier to the U.S. government and that aside, I wouldn’t put in any equipment that would raise security concerns.” Sprint has already excluded Huawei from bidding on its network upgrade after the U.S. commerce secretary expressed concerns to Hesse about the vendor. Huawei is a supplier to Softbank, however according to CEO Masayoshi Son Huawei is not a significant player, and said he was aware of the issues the U.S. government is currently having with Huawei and would respect any possible outcome.

Yankee Group Senior Analyst Rich Karpinski comments

“Huawei’s future as an important supplier to SoftBank in Japan is at risk with SoftBank’s move to buy a majority share of Sprint. As a U.S. operator, Sprint is under notice from the U.S. government that deployment of Huawei infrastructure means no future U.S. government business. A key element of the SoftBank deal rationale relates to growing the company’s scale to secure better deals on devices and infrastructure. For devices, the deal should not affect Huawei’s opportunities with SoftBank or Sprint. For infrastructure, however, SoftBank will be forced to focus future equipment spending on non-Chinese suppliers.

For Huawei, this will be a bitter blow. Huawei put tremendous energy into Sprint’s Network Vision project only to see its prospects scuttled by the U.S. government. Likewise, Huawei has become an important supplier of multi-mode base stations to Clearwire as that company shifts from WiMAX to TD-LTE. A deal set that bundles SoftBank with Sprint and Clearwire puts Huawei at risk of losing existing limited U.S. traction, not just future deals in Japan.

The U.S. government has put Huawei in an untenable position. The company must prove a negative: That they are not a threat. So far, U.S. officials and politicians have cast aspersions that Huawei might be a cyberthreat, but with no hard evidence of an actual problem. It is not fair, but it remains a political reality that is unlikely to change without major shifts in China and the United States—shifts far from Huawei’s control.”