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Nepal awards 4G mobile network expansion contract to Chinese companies, amid concern of security breaches

February 20, 2019

Nepal awards 4G mobile network expansion contract to Chinese companies, amid concern of security breaches

Kathmandu: At a time when Chinese telecom companies face international flak for security breach allegations, Nepal’s state-owned telecommunication service provider has signed agreements with two such organisations to expand 4G/LTE services across the country.

The state-owned Nepal Telecommunication Corporation (NTC) signed agreements with Hong Kong-based China Communication Service International (CCSI) for developing radio access network (RAN), and another with China’s leading telecom equipment manufacturer ZTE for installing NTC’s core network. The project, worth around Nepalese Rupee (NR) 19 billion, is expected to connect 6.5 million cell phone users under the 4G core network system, according to NTC spokesperson Pratibha Vaidya.

NTC plans to put in place one core network and two RANs to expand the 4G/LTE network, as per the agreement with both Chinese companies. “The core network system acts as a pool to connect the service provider with NTC system, and the radio access network offers outreach to NTC customers. The project is expected to be completed within a year,” Vaidya says.

NTC introduced 4G/LTE services for the first time in Pokhara and Kathmandu on January 1, 2017. Officials at Nepal Telecommunications Authority said NTC subscribers can select services based on their interests and needs by using 2G, 3G or 4G network once the project is completed.

Although the NTC signed individual MoUs with CCSI and ZTE on February 3, as per directives issued by the Finance Committee, Development and Technology Committee, and the Ministry of Communications and Information Technology, these agreements have already drawn controversy even before the companies could start actual work on the ground.

While some lawmakers have expressed concern over issues of national security, there is also the matter of the project’s inflated cost. Reportedly, Ncell, a Nepal-based private telecom operator, awarded a similar contract to the Chinese companies at just around NRs 4 billion for the expansion of 4G/5G services.

During a Finance Committee meeting, Ram Kumari Jhankri, a lawmaker from the ruling Nepal Communist Party (NCP), asked why the same expansion work is being carried out by another telecom service provider in the country at NR 19 billion, about NR 15 billion more Ncell’s contract.

Meta Mani Chaudhary, from the ruling NCP, has also asked why NTC is paying such a large amount for a project that would cost around NR 4 billion. “The procurement process does not seem transparent. We can clearly see foul intention even with our closed eyes,” he said in the same meeting.

Contract with Huawei withdrawn over security concerns

Earlier, after a competitive bidding process, the government’s decision to work with Huawei Technologies Co. Ltd. – a Chinese telecommunications organisation – to develop an ‘action room’ at the Prime Minister’s Office drew flak as security experts warned of a serious threat to Nepal’s national security.

Huawei was to equip the ‘action room’ with video conferencing and conference call facilities, among others. Although government officials cited procedural reasons behind scrapping the NR 54.2 million deal, experts say the Prime Minister’s office decided to scrap the deal as many raised issues of security concerns.

Experts have advised the government not to sign information and technology-related contracts to a country that has direct security and strategic interests. “Giving contracts to such companies to work within sensitive government offices will have serious security implications,” said security and strategic affairs expert, Geja Sharma Wagle. He argued that this could compromise Nepal’s security interest as PMO as the central government office will have sensitive information and they could be easily breached.

Diplomatic sources said a few Western diplomats in Kathmandu had also conveyed their concern to government officials about awarding this sensitive contract to Huawei. Apart from security issues, the Commission for the Investigation of Abuse of Authority had also begun investigations into alleged corruption and misappropriation in the deal.

This, however, is not a one-off instance. Earlier, Nepal declined India’s offer to modernize their immigration facilities and printing of machine-readable passports, citing security reasons. The government is also yet to accept assistance proposed by the US to develop immigration-related software to keep a record of tourists entering Nepal from various checkpoints.

Concerns over Chinese Telecom Companies globally

As China’s major telecom companies Huawei, ZTE and their subsidiaries make greater inroad in various countries, the US has begun pushing its allies to fight back Chinese companies in its race for 5G domination with the South Asian giant.

Analysts argue that the world is in a new arms race involving technology, which poses a larger threat to national security, according to an investigative piece in The New York Times. Since the most powerful weapons — short of nuclear arms — are cyber-controlled, a country that dominates the 5G race stands in a position to gain immense economic intelligence and a military edge.

The US and its allies allege that China has been using its telecom companies to gather intelligence. The US has not only banned its companies from using Chinese-origin equipment for communication but is also convincing its allies to avoid Chinese telecom companies. “Many Western countries have expressed concern that China is promoting these companies to gather intelligence. I think the reason behind this is the fact that no Chinese companies are fully independent of its government,” explains Wagle.

Concerned over security breaches, countries like the UK, Australia, New Zealand, Canada, Japan, France, Germany, Poland and the Czech Republic are reviewing their earlier decisions to use Huawei or its rival ZTE for 5G expansion projects.

There is also an equally large concern of intellectual property theft by Chinese telecom companies and violation of international economic sanctions. The US charges against Huawei Chief Financial Officer Meng Wanzhou have increased pressure on Huawei and the Chinese government. Reports said that Meng was arrested allegedly for deceiving U.S. financial institutions into processing transactions that violated economic sanctions imposed by the US against Iran.

However, China has said that the US and other countries have not been able to present any conclusive evidence that Chinese telecom companies threaten their national security. Addressing a daily press briefing in Beijing on Wednesday (February 13, 2019), Chinese Foreign Ministry Spokesperson Hua Chunying said critics of Huawei Technologies were fabricating threats and misusing state power to “suppress the legitimate development rights and interests of Chinese enterprises” and are “using political means to intervene in the economy”.