(Bloomberg) -- T-Mobile US Inc. Chief Executive Officer John Legere says his company doesn’t use equipment from Huawei Technologies Co., and won’t after buying Sprint Corp. to form a bigger No. 3 in the U.S. wireless market.
“Let me be clear –- we do not use Huawei or ZTE network equipment in any area of our network. Period. And we will never use it in our 5G network,” Legere said in written testimony prepared for a hearing Wednesday before the House communications subcommittee.
The statement is in response to critics who’ve raised the issue of the Chinese equipment maker as a risk to national security to build opposition to the proposed $26.5 billion merger.
Sprint parent SoftBank Group Corp. has “significant ties” to Huawei, as does T-Mobile parent Deutsche Telekom AG (DE:DTEGn), according to Carri Bennet, general counsel for the Rural Wireless Association that represents smaller competitors to the merging parties. Huawei supplies Deutsche Telekom, according to data compiled by Bloomberg.
“Allowing a Japanese-influenced company and German-influenced company to merge when both have significant 5G ties to Huawei appears to run counter to U.S. national security concerns,” Bennet said in testimony submitted for the hearing.
Lawmakers and the administration of President Donald Trump say Huawei poses a potential security threat, if only because it can’t buck orders from China’s government, and Secretary of State Michael Pompeo this week urged Europeans to shun the Shenzhen-based company.
Huawei says it’s privately held, doesn’t take orders from the Beijing government, and wouldn’t do so because that would ruin its business that relies on income worldwide.
The Federal Communications Commission is considering whether to effectively ban Huawei from U.S. networks; already the company’s gear is effectively limited to small providers attracted by low prices.
Still, critics bring up Huawei and perils that are likewise ascribed to ZTE Corp (HK:0763)., another Chinese gear maker.
“T-Mobile, Sprint, and their parent companies refuse to commit to the American public not to use the Chinese companies in building 5G infrastructure if allowed to merge,” Protect America’s Wireless, a group that has held several news conferences critical of the merger, said in a Tuesday press release. The group has refused to disclose its backers.
Legere seemed to have the group in mind.
“Opponents of the transaction have set up a shadowy group that refuses to disclose its donors, to lob allegations that this transaction will allow Huawei and ZTE into U.S. networks,” the T-Mobile chief said in his testimony. “That’s false, and they know it is.”
A U.S. watchdog group that checks the national security implications of deals -- the Committee on Foreign Investment in the U.S., or Cfius -- has approved the proposed merger, the companies said in December.
It’s not clear how much weight the security concerns will carry in the debate. Nine U.S. senators in a Tuesday letter raised other consequences as they urged the FCC and Justice Department to kill the deal. Problems include less competition, higher bills, and lost jobs, the lawmakers said.
Legere argues that the merger will produce more jobs, lower prices and competition for market leaders AT&T Inc (NYSE:T)., Verizon Communications Inc (NYSE:VZ). and even cable providers such as Comcast Corp (NASDAQ:CMCSA).
The decision on whether the deal can go ahead won’t rest with lawmakers, but with regulators at the FCC and Justice Department, who are influenced by Congress. Wall Street seems less than sanguine: the premium, a measure of how risky traders perceive a deal to be be, has risen steadily since early October.
(Corrects attribution in 10th paragraph.)