Wind deal bogged down by security issues

Nestor E. Arellano

11 years ago

VimpelCom Ltd., the Amsterdam-based telecom company investing in Wind Mobile, has been negotiating a deal for greater control over the Toronto wireless carrier for nearly eight months now, however concerns over national security has stymied its efforts.

Canadian officials are exercising caution in approving the deal because it would mean handing to a Russian entity, control of a Canadian firm built by a Chinese company, according to a report from the Globe and Mail.

Wind’s network infrastructure was built by Huawei Technologies Co. Ltd. of China. The major stockholder of VimpelCom is Mikhail Fridman, an energy and telecommunications magnate from Russia.

(Anthony Lacavera)

Canadian Anthony Lacavera, for now holds indirect voting control of Wind Mobile as its chief executive officer. His stake in the company will be bought out by VimpelCom and the foreign company non-voting shares will be converted to voting stock should the deal go through. This would give a foreign company 99.3 per cent control over Wind.

In a move meant to bolster competition in the wireless industry, Ottawa recently altered foreign investment rules to allow foreign entities to control of telecom firms with 10 per cent market share or less. This would make the VimpelCom bid a very interesting test case.

The government is also concerned that a Chinese company providing the core components of Wind’s network which serves about 600,000 wireless customers in Canada.

Huawei has repeatedly been accused by United States politicians of enabling Chinese government sponsored cyber espionage activities or sabotage of foreign communication equipment. Much has also been made of Huawei’s founder Ren Zhengfei of being a former People’s Liberations Army member.

In a statement today, Wind also said it has been proactively adressing security concerns.

“Wind Mobile is proud to say there has never been a security breach (hacking, spying or otherwise) on our network.,” the statement said. “As an example of our initiative in this regard, our core network is ring-fenced with firewalls from Juniper Networks (a top tier, groundbreaking North American company with security products being one of their key strengths).”

Like all of the other major mobile operators in this market, Wind uses equipment from more than a dozen suppliers in our core network, the company said.

Wind also said it works with the Canadian Security Intelligence Service and other federal and provincial law enforcement agencies on both security and emergency matters and “had never had any security issues” with its network.

Although, Huawei has repeatedly denied any involvement in cyber spying, public officials are worried approving the deals would compromise security at a time when reports abound that Canada’s communication systems are plagued by security breaches linked to organizations in China.

Industry Canada has declined to comment on the delay saying only that it remains committed to encouraging competition in the wireless sector.

Decision on whether VimpelCom could acquire full-ownership of Wind must be made before July 4. However, Lacavera’s buyout deal expires on June 30, according the Globe and Mail.

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