Security Concerns in Play for VimpelCom in Canada
- Jun. 17 2013 00:00
- Last edited 18:53
TORONTO — National security concerns have delayed theáCanadian government’s approval of two deals that would solidifyáVimpelCom’s ownership of wireless carrieráWind Mobile, a Canadian newspaper reported, citing undisclosed sources.
VimpelCom, a telecommunications company that is Wind’s largest shareholder, has been trying for months to take control ofáToronto-based Wind after Canadian investment rules were changed to allow foreign ownership of smaller telecom companies.
However, Canadian officials wary of giving control of Wind’s infrastructure to an entity with strong ties toáRussiaáhave hampered the closing of the deals,áthe Globe and Mailáreported Friday, citing multiple undisclosed sources.
VimpelCom’s top shareholder isáMoscow-basedáAltimo, a company controlled by billionaireáMikhail Fridman.
Amsterdam-based VimpelCom Ltd. has saidáWind Mobileáis not a part of its core business, suggesting that it is open to divesting the wireless company once it has gained full ownership.
TheáCanadian governmentásaid in an e-mail that the strict confidentiality provisions of the InvestmentáCanadaáAct precluded it from addressing the report, but that it “is clearly committed to encouraging competition in the wireless sector.”
Canada’s wireless industry is dominated by Telus Corp., BCE Inc.’s Bell unit andáRogers Communications, each of which has more than 7 million customers. Wind has about 600,000.
TheáCanadian governmentáis also concerned about potential spying or hacking because Wind’s core network infrastructure was built byáChina’s Huawei Technologies, the Globe and Mail reported.
Huawei, founded in 1987 by a former People’sáLiberation Armyáofficer, has raised security concerns in theáUnited States,áCanada, Britain andáAustraliaáover alleged links between it and the Chinese state. VimpelCom strongly denied any suggestion that its full ownership of Wind would increase the risk of a security breach.
Wind said its network has never been hacked, spied on or been the subject of any other security breach, and that it worked cooperatively and proactively with law enforcement.
Huawei equipment is also used in the radio access portion of Bell’s mobile network, which it shares with Telus, a Bell spokesman confirmed.
Wind was started by Canadian entrepreneuráAnthony Lacaveraáwith the financial backing ofáEgypt’s Orascom Telecom, which VimpelCom later took over.
Lacavera has indirect voting control of Wind, a stake VimpelCom will buy out as part of the proposed deal that is awaiting approval. That part of the deal is set to expire by the end of June, an industry source with knowledge of the situation said.
VimpelCom must first get a green light for the conversion of Orascom’s non-voting shares into voting shares. It can then proceed with the purchase of Lacavera’s economic stake.