T-Mobile US and Sprint have received approval from the Committee on Foreign Investment in the United States (CFIUS) for their proposed $26 billion merger. In addition to CFIUS, the deal got a nod from the Justice Department, the Department of Homeland Security, and the Defense Department.
Surprisingly, Huawei’s equipment seems to have been a factor in the approvals.
Some groups had cited security concerns related to the non-U.S. based ownership of Sprint’s parent company SoftBank and T-Mobile US’ majority owner Deutsche Telekom. DT and SoftBank use some telecom equipment from Huawei, and certain groups don’t want Huawei equipment infiltrating the U.S. telecommunications network.
Sprint is 84 percent owned by Japan-based SoftBank, and T-Mobile US is 63 percent owned by German-based DT.
Reuters, citing unnamed sources, said last week that both both DT and SoftBank had been seeking to replace Huawei network equipment. And in a follow-up story Reuters said the deal was cleared after DT and SoftBank offered to stop using Huawei equipment.
CFIUS, formerly an obscure agency, has been throwing its weight around in the last couple of years. In 2017, the agency put up roadblocks to then-Singapore-based Broadcom’s efforts to buy Brocade, citing security concerns. Ultimately, Broadcom re-domiciled its headquarters to the United States, President Trump got involved, and CFIUS gave Broadcom its approval.
And in early 2018, Broadcom attempted a hostile takeover of Qualcomm. But CFIUS cited concerns about Broadcom’s connection with Chinese companies such as Huawei. CFIUS’ objections along with other factors caused that takeover attempt to fail.
Today’s approvals from CFIUS and the other U.S. agencies removes another hurdle from the T-Mobile US-Sprint merger, which is expected to close during the first half of 2019.