Sprint Nextel Corporation (NYSE:S) and Softbank Corp (PINK:SFTBF) (TYO:9984) have agreed not to use equipment made by Huawei Technologies Co. after their merger. U.S. regulators have been looking over the merger agreement.
According to Bloomberg, one of the assurances the U.S wanted was for the new combined company to avoid using equipment made by Huawei because of concerns about electronic spying from China. Back in October, the House Intelligence Committee said the U.S. should prevent mergers or acquisitions by ZTE Corporation (SHE:000063) and Huawei because equipment made by the two Chinese companies could enable the country to spy on the U.S. using its own telecommunications networks.
Softbank Corp (PINK:SFTBF) (TYO:9984) currently buys equipment from both Huawei and ZTE Corporation (SHE:000063) for use in its mobile network in Japan.
The committee said Clearwire Corporation (NASDAQ:CLWR), which Sprint Nextel Corporation (NYSE:S) owns a majority share of, already contains some Huawei equipment. Both Sprint Nextel and Softbank have said they would “take mitigation efforts” to replace that equipment.
In addition to the House Intelligence Committee, the U.S. Department of Justice, the Federal Communications Commission and the Committee on Foreign Investment in the U.S. are all examining the merger proposal.
If the proposal goes through, Softbank Corp (PINK:SFTBF) (TYO:9984) would pay for the 70 percent acquisition of Sprint Nextel Corporation (NYSE:S) through the release of $4 billion in bonds. The acquisition would also give the company 96 million subscribers in both Japan and the U.S.
In addition, it could clear the way for Sprint Nextel to acquire Clearwire Corporation (NASDAQ:CLWR)—if DISH Network Corp. (NASDAQ:DISH) or another bidder doesn’t pull Clearwire away from Sprint’s offer.
Shares of Sprint Nextel Corporation (NYSE:S) rose 2 percent in late morning trading at the New York Stock Exchange.