Huawei, ZTE Spook Sprint?

9:20 AM -- In a blow to Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763)'s US ambitions, Sprint Corp. (NYSE: S) has rejected bids from the Chinese operators for a multi-billion-dollar mobile network project mainly due to US government concerns over national security, reports The Wall Street Journal.

Citing "people familiar with the matter," the article says that Sprint eliminated Huawei and ZTE from the selection process even though the vendors submitted bids that were lower than the other three companies vying for the deal, namely Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Samsung Electronics Co. Ltd. (Korea: SEC). Sprint's target budget for the network upgrade is between US$5 billion and $7 billion, and some of the bids came in as high as $8.5 billion.

Huawei has gone to great lengths to break into a Tier 1 US operator and to allay security fears in Washington. For example, the company hired the Amerilink Telecom Corp. consultancy, which was founded by former vice chairman of the US joint chiefs of staff Bill Owens; took on former Bush administration official John Bellinger as an advisor; and appointed industry executive Matt Bross as CTO. (See Huawei, AT&T, and the NSA, US Gets Worried About Huawei , Huawei's Latest US Offensive, Matt Bross Joins Huawei as CTO, and No Way Huawei? )

According to The WSJ report, though, Huawei will not have a Sprint contract to show for all of those efforts.

— Michelle Donegan, European Editor, Light Reading Mobile

spc_markl 12/5/2012 | 4:19:22 PM
re: Huawei, ZTE Spook Sprint?

In operating in the 2.5 GHz spectrum, Sprint needs cheaper 4G equipment more than Verizon Wireless.  So, the pricing from the Chinese vendors would have been very attractive. 

As I said in a previous post, I believe that the equipment quality issues are greater than being indicated. 

The concern by the federal government is going to be much larger with fiber optic lines in which there is truly a need for secure communication.  It will not be about just making suggestions by the government, there will likely be enforcement.  The mere fact that these wireless lines interface with optical networks may be considered to be a big problem.

Mark Lutkowitz, Telecom Pragmatics

Michelle Donegan 12/5/2012 | 4:19:19 PM
re: Huawei, ZTE Spook Sprint?

Hi Mark,

Good point, and something I realize I should have pointed out from the WSJ article is that while security was the main reason for rejecting the vendors, another WSJ source noted that there was also some concern at Sprint about the ability of the Chinese companies to deliver on the required work.



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