Huawei Denies Wrongdoing Against T-Mobile, Pleads Not Guilty

Appearing before the U.S. District Court in Seattle, the two units of Chinese telecom equipment manufacturing firm, Huawei Technologies Co Ltd, pleaded not guilty to charges of IP theft from T-Mobile US, Inc. (NYSE:S) . A trial date for the levied charges has been set for Mar 2, 2020 by Judge Richardo S. Martinez.

Earlier, the U.S. Justice Department had charged two units of Huawei with a 10-count indictment, accusing them of stealing robotic technology from T-Mobile to test smartphones’ durability. The court had arraigned Huawei Device Co Ltd and Huawei Device USA Inc on Feb 28 to stand trial for the charges. The latest indictment traces its roots to a civil suit filed by T-Mobile in Seattle District Court in 2014, in which it accused Huawei of stealing trade secrets at the behest of the R&D team based in China. Although the case was settled with a $4.8-million compensation award to T-Mobile in 2017, it seems that the Trump administration will leave no stone unturned to ban China’s Huawei and ZTE (HK:0763) from the country.

Additionally, the federal prosecutors had issued a 13-point indictment against Huawei for allegedly deceiving international banks into clearing transactions (worth millions of dollars) with Iran despite economic sanctions. However, no arraignment date has been put forth for it.

Nonetheless, the latest developments could cast a shadow over the bilateral trade talks between the United States and China, which seemed to strike the right chords in the past week as both sides signaled intentions to resolve their differences.

With significant progress in the negotiations, President Trump has reportedly extended the Mar 1 deadline to reach a sweeping agreement to end the trade skirmishes. A probable meeting between the top leaders of both countries is also in the cards in late March. Trump further observed that key issues, such as concerns related to technology transfer and intellectual property rights were ironed out, although no official statements were released in this regard. Media reports cited that commonality was reached on various matters that hitherto remained bone of contention between the two countries.

However, there seemed to be some lingering issues with difference of opinion on China’s subsidies, cyber theft, public sector enterprises and so-called forcible technology transfers. Common ground on a mutual enforcement mechanism remained particularly elusive. Although no apparent breakthrough has yet been made on such matters, the Trump administration maintained that the talks have been quite fruitful. Higher level meetings are scheduled to continue through the end of this week as both parties appear to be eager to walk the extra mile to strike a full-scale accord.

Meanwhile, T-Mobile remains poised to complete its merger with Sprint Corporation (NYSE:S) in an all-stock transaction in the first half of 2019. The deal will help accelerate development of faster 5G wireless networks. The New T-Mobile would have about 127 million customers. It will have a strong closing balance sheet and a fully funded business plan, with a strong foundation of secured investment grade debt at close. T-Mobile has received shareholder approval related to the merger. This is considered as a step forward in creating the New T-Mobile through which the company will bring robust competition to the 5G era. The stock has recorded average return of 16.5% in the past year, while the industry impoved 3.2%.

T-Mobile currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Gogo Inc. (NASDAQ:GOGO) , carrying a Zacks Rank #2 (Buy) and Telenav, Inc. (NASDAQ:TNAV) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gogo beat earnings estimates in each of the trailing four quarters, average being 34.4%.

Telenav beat earnings estimates in each of the last four quarters, average being 23.7%.

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