US security concerns block ZTE, Huawei bids

Huawei and ZTE (0763.HK, 000063.SZ) have been blocked from a contract to help US telecom firm Sprint Nextel (S.NYSE) modernize its cellular network due to security concerns, the Wall Street Journal reported. Huawei and ZTE had submitted bids for the contract that were lower than competing bids from Alcatel-Lucent (ALU.NYSE) , Telefonaktiebolaget LM Ericsson (ERIC.NASDAQ) and Samsung Electronics (SMSN.LSE, SMSD.LSE, 005930.KRX, 005935.KRX). The rejection of the Huawei and ZTE bids comes after the US defense department and US officials including Commerce Secretary Gary Locke expressed concern over the potential security risk posed by the companies, which have ties to China’s government and military. A letter from eight US senators to the Obama administration in August laid out particular concerns, noting that the companies might be subject to "significant influence by the Chinese military which may create an opportunity for manipulation of switches, routers, or software embedded in American telecommunications network so that communications can be disrupted, intercepted, tampered with, or purposely misrouted."