Sprint says ‘no’ to Chinese kit for LTE rollout

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If SoftBank takes control of Sprint, the combined group will not be able to use SoftBank’s experience of using Huawei equipment for TD LTE mobile broadband services

Sprint has taken control of Clearwire by a tiny margin, opening the way to an ambitious rollout of TD LTE services, especially if SoftBank’s $20 billion bid for Sprint goes ahead.

Japanese company SoftBank has deep experience of TD LTE — the time-division variant of LTE that makes efficient use of unpaired mobile spectrum for high-speed data services. Its Wireless City Planning subsidiary is installing a network, using small cells, that by early 2013 should be delivering high-speed mobile internet to 97% of the population of Japan.

WCP plans to have a dense network of 150 base stations per square kilometre in order to overcome the capacity problems that are causing problems for broadband wireless companies worldwide.

Only one problem for Sprint, if it wants to use SoftBank’s experience: SoftBank is using Huawei equipment for the Wireless City Planning project.
Dan Hesse, CEO of Sprint, who is expected to stay at the top if SoftBank takes over, is already alert to that problem, which comes only two weeks after a US congressional committee slammed Huawei and ZTE, claiming there are security issues — claims that both Chinese vendors deny.

According to reports, both Hesse and Masayoshi Son, the founder and CEO of SoftBank, have both been quick to deny that they will use Chinese equipment for a TD LTE-enabled Sprint.

Hesse already has personal experience of trying to buy Chinese kit, a few years ago, but was warned off in a call from Washington DC.

According to the Financial Times, he now says: “Sprint has crossed this bridge before and chose not to use equipment in our network that raised any security concerns, so we would always, regardless of the approval process before or after, be very sensitive to that issue.”

The issue is particularly sensitive because the US has not taken kindly to foreign takeovers of US telecoms companies. Deutsche Telekom’s purchase of VoiceStream Wireless for $35 billion in 2000 to turn it into T-Mobile USA somehow sneaked under the wire.
SoftBank is offering $20 billion — Japan’s biggest foreign takeover bid so far — to buy 70% of Sprint. Of that sum, $12 billion will go to shareholders and $8 billion to boost Sprint’s reserves.

In a fast-moving story, Sprint indicated just after the agreed announcement with SoftBank that it did not plan to look at its relationship with Clearwire until after the SoftBank deal was complete — but then it quietly bought $100 million worth of shares belonging to Craig McCaw, the founder of Clearwire, and his holding company. That took Sprint’s stake in Clearwire to 50.4%, enough to exercise control.

Sprint and Clearwire have had an entangled history for years. Six years ago, when Barry West — a former associate of McCaw — was CTO of Sprint he got the WiMax vision. He was an evangelist for WiMax, the first viable form of 4G. Both Sprint and Clearwire were setting up WiMax ventures at the same time, believing it had a four-year advantage over whatever the GSM community planned to do with 4G: in 2007, the term “LTE” had hardly been heard.

After an early abortive attempt to merge their WiMax operations in mid 2007, Sprint launched its service, under the Xohm brand, in early 2008 — but four months later the merger happened, with Sprint taking a 51% stake and agreeing to run WiMax services as an MVNO on Clearwire’s nationwide capacity.

Since then LTE has become the acknowledged global standard for 4G. In the US, market leaders Verizon Wireless and AT&T both announced their decisions to go for the more spectrum-efficient technology, followed by almost every other operator — including T-Mobile USA, a small company called MetroPCS with which T-Mobile plans to merge, and both Sprint and Clearwire.

Sprint sold part of its stake in financially troubled Clearwire to below 50% soon after the 2008 deal. With US mobile operators — apart from the top two — now clearly in an M&A frenzy, Clearwire has spectrum that Sprint needed to put out of reach of others.

It will take until the middle of 2013 for Sprint and SoftBank to complete their deal, if they manage to win approval in the face of opposition to foreign takeover. There will probably be some grumbling from lobbyists for the big two in the bars and restaurants of Washington DC, especially as opposition from Sprint and Hesse was a big factor in blocking AT&T’s proposed purchase of T-Mobile USA for $39 billion in late 2011.

If the deal goes ahead Sprint, powered with dollars from SoftBank, will no doubt be keen to go ahead as fast as possible with its plans to roll-out LTE for mobile data. At that point Clearwire may be absorbed into Sprint, or Sprint may continue to operate as an MVNO — though Clearwire will have to find funds to build its own LTE network.

But Huawei will not get a look in, despite its successful pioneering of TD LTE in Japan — probably the biggest TD LTE project so far.
However, Alcatel-Lucent, Ericsson and Nokia Siemens networks all have TD LTE in their portfolio. And they have all won contracts to supply network equipment — alongside both Huawei and ZTE — to what’s likely to eventually be the world’s biggest TD LTE network: ironically, the orders come from China Mobile.

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