UK Officials Urge Vodafone to Spin Off Sensitive Division Amid National Security Concerns Over UAE Investment

UK government officials have expressed concerns over national security following the United Arab Emirates-backed Emirates Telecommunications Group’s acquisition of a 14.6% stake in Vodafone. This concern is primarily due to Vodafone’s significant role in supplying sensitive technology to various government departments and agencies, including those integral to national security.

Deputy Prime Minister Oliver Dowden highlighted the issue on Wednesday, labeling the investment deal as a potential “national security risk” to the UK. Dowden revealed that the government had agreed upon measures to mitigate these risks, though the specifics of these measures were not disclosed. He emphasized that while the UK is open to global investment, it is essential to address any potential national security concerns effectively.

Sources familiar with Vodafone’s operations suggest that the focus of these concerns is on a division within the company known as Vodafone Business Security Enhanced (VBSE). VBSE handles highly sensitive technology projects for key government entities, including the Ministry of Defence, Foreign Office, Ministry of Justice, and the Home Office. The nature of VBSE’s work is so critical that many of its government contracts are not publicly listed, and some of its staff hold high-level security clearances.

Despite the government not mandating it, some officials believe that spinning off VBSE might be the safest course of action to protect the national security functions it performs. VBSE, with a significant number of its UK workforce based in Hampshire, operates in a highly secure environment. Many of its staff members have backgrounds in the military, intelligence services, or other sensitive government sectors. Steve Knibbs, the head of VBSE, has a history of working at GCHQ and in the British military and also chairs the national security committee of the industry body TechUK.

Vodafone’s range of services extends from mobile networks for civil servants to owning and maintaining subsea cables and providing services to the UK’s military court service. The sensitivity of the military court service’s hearings, which sometimes involve national security risks, necessitates secure IT support, often with defendants and advocates participating via video link.

The terms of the deal between Vodafone and Emirates Telecoms permit the latter to appoint an additional executive to Vodafone’s board if its ownership exceeds 20%, with the potential to increase its stake to nearly 25%. In response, the Cabinet Office outlined requirements for Vodafone to establish a national security committee to oversee its work impacting the UK’s national security.

This development comes amidst increasing scrutiny over various UK deals backed by the Gulf state, including the UAE-backed acquisition of the Telegraph and Spectator groups by RedBird IMI, primarily funded by Sheikh Mansour bin Zayed Al Nahyan, Vice-President of the UAE.

In response to these developments, a Vodafone spokesperson stated that there are no current plans to alter or spin off VBSE, describing it as a critical 24/7 business unit with technical operational separation, serving both private and public organizations in the UK. The Cabinet Office declined to comment on the matter.