Amsterdam-based VimpelCom is struggling to consummate its planned takeover of Wind Mobile agreed in January due to national security worries.
Canadian officials are concerned about Wind’s network, built by China’s Huawei, being controlled by a…
Amsterdam-based VimpelCom is struggling to consummate its planned takeover of Wind Mobile agreed in January due to national security worries.
Canadian officials are concerned about Wind’s network, built by China’s Huawei, being controlled by a partly Russian-owned company, the Globe and Mail reported citing multiple sources familiar with the situation.
VimpelCom is registered in Bermuda, headquartered in the Netherlands and traded on the NYSE, however Altimo – a vehicle of Russian oligarch Mikhail Fridman – is VimpelCom’s largest shareholder. It holds 47.0% of the telco’s voting rights while Telenor is the other main shareholder with 43%.
VimpelCom gained a minority stake in Wind following its purchase of Naguib Sawiris’ Orascom Telecom. Last summer Ottawa liberalised investment rules in telecoms meaning operators with 10% market share or less could be 100%-foreign owned. At the start of this year VimpelCom struck a deal to take its stake in Wind to 99.3%. The transaction would see it become the first foreign owner in Canadian telecoms. However VimpelCom is said to be looking at strategic alternatives for Wind and has reportedly been looking to sell the business before an acquisition has been completed.
Part of the logic behind the liberalisation of investment from abroad was to increase competition in the wireless industry where the government has been trying to engineer a viable nationwide fourth player.
The regulatory delay to the VimpelCom takeover comes amid a flurry of activity which could lay the ground work for the consolidation of smaller operators to create that fourth player. Mobilicity is in severe financial difficulty after Ottawa effectively blocked its sale to Telus, while Public Mobile has been bought by private investors.
However, who controls Wind – Canada’s largest challenger with north of 600,000 subscribers – is seen as crucial to how this consolidated fourth player might take shape.
In response to the report Wind was keen to emphasise that its network was secure.
“Wind is proud to say there has never been a security breach (hacking, spying or otherwise) on our network,” the operator said. “We proactively address any and all security concerns.” Wind has been using Huawei equipment for a number of years.”
In a statement VimpelCom took umbrage at any suggestion its ownership of Wind could compromise the security of the operator and emphasised that it was very much an international business. While the company previously held a minority stake in Wind it is estimated to have invested roughly US$1.7bn, alongside Orascom.
Huawei responded to the report by saying: “We’ve operated in an environment that has placed a premium on ensuring the security of networks in Canada, and we continue to work transparently and openly with our carrier partners and the federal government to ensure the equipment we provide in Canada is safe, secure and reliable. Any suggestion to the contrary is completely false.”
The existence of Huawei equipment in Wind’s network has concerned government officials for years, sources cited in the report claimed. Wind was keen to emphasise that it uses equipment from more than a dozen suppliers in its core network, and added that the backbone was ring-fenced with firewalls from a third party, Juniper Networks.
Huawei has been effectively blocked from participating in the US wireless industry by the legislature due to security concerns, and other countries have taken similar stances. The Chinese vendor was founded by Ren Zhengfei, a former major in the Chinese army and is employee-owned, independent from Beijing. However critics have argued that given that it operates within China’s economic model of “state capitalism” it cannot help but be an apparatus of the Chinese government.
