Wall Street Journal: When Western companies pulled back from Iran after the government’s bloody crackdown on its citizens two years ago, a Chinese telecom giant filled the vacuum.
The Wall Street Journal
By STEVE STECKLOW, FARNAZ FASSIHI and LORETTA CHAO
When Western companies pulled back from Iran after the government’s bloody crackdown on its citizens two years ago, a Chinese telecom giant filled the vacuum.
Huawei Technologies Co. now dominates Iran’s government-controlled mobile-phone industry. In doing so, it plays a role in enabling Iran’s state security network.
Huawei recently signed a contract to install equipment for a system at Iran’s largest mobile-phone operator that allows police to track people based on the locations of their cellphones, according to interviews with telecom employees both in Iran and abroad, and corporate bidding documents reviewed by The Wall Street Journal. It also has provided support for similar services at Iran’s second-largest mobile-phone provider. Huawei notes that nearly all countries require police access to cell networks, including the U.S.
Huawei’s role in Iran demonstrates the ease with which countries can obtain foreign technology that can be used to stifle dissent through censorship or surveillance. Many of the technologies Huawei supports in Iran—such as location services—are available on Western networks as well. The difference is that, in the hands of repressive regimes, it can be a critical tool in helping to quash dissent.
Last year, Egyptian state security intercepted conversations among pro-democracy activists over Skype using a system provided by a British company. In Libya, agents working for Moammar Gadhafi spied on emails and chat messages using technology from a French firm. Unlike in Egypt and Libya, where the governments this year were overthrown, Iran’s sophisticated spying network remains intact.
In Iran, three student activists described in interviews being arrested shortly after turning on their phones. Iran’s government didn’t respond to requests for comment.
Iran beefed up surveillance of its citizens after a controversial 2009 election spawned the nation’s broadest antigovernment uprising in decades. Authorities launched a major crackdown on personal freedom and dissent. More than 6,000 people have been arrested and hundreds remain in jail, according to Iranian human-rights organizations.
This year Huawei made a pitch to Iranian government officials to sell equipment for a mobile news service on Iran’s second-largest mobile-phone operator, MTN Irancell. According to a person who attended the meeting, Huawei representatives emphasized that, being from China, they had expertise censoring the news.
The company won the contract and the operator rolled out the service, according to this person. MTN Irancell made no reference to censorship in its announcement about its “mobile newspaper” service. But Iran routinely censors the Internet using sophisticated filtering technology. The Journal reported in June that Iran was planning to create its own domestic Internet to combat Western ideas, culture and influence.
In winning Iranian contracts, Huawei has sometimes partnered with Zaeim Electronic Industries Co., an Iranian electronics firm whose website says its clients include the intelligence and defense ministries, as well as the country’s elite special-forces unit, the Islamic Revolutionary Guards Corps. This month the U.S. accused a branch of the Revolutionary Guards of plotting to kill Saudi Arabia’s ambassador to the U.S. Iran denies the claim.
Huawei’s chief spokesman, Ross Gan, said, “It is our corporate commitment to comply strictly with all U.N. economic sanctions, Chinese regulations and applicable national regulations on export control. We believe our business operations in Iran fully meet all of these relevant regulations.”
William Plummer, Huawei’s vice president of external affairs in Washington, said the company’s location-based-service offerings comply with “global specifications” that require lawful-interception capabilities. “What we’re doing in Iran is the same as what we’re doing in any market,” he said. “Our goal is to enrich people’s lives through communications.”
Huawei has about 1,000 employees in Iran, according to people familiar with its Iran operations. In an interview in China, a Huawei executive played down the company’s activities in Iran’s mobile-phone industry, saying its technicians only service Huawei equipment, primarily routers.
But a person familiar with Huawei’s Mideast operations says the company’s role is considerably greater, and includes a contract for “managed services”—overseeing parts of the network—at MTN Irancell, which is majority owned by the government. During 2009’s demonstrations, this person said, Huawei carried out government orders on behalf of its client, MTN Irancell, that MTN and other carriers had received to suspend text messaging and block the Internet phone service, Skype, which is popular among dissidents. Huawei’s Mr. Plummer disputed that the company blocked such services.
Huawei, one of the world’s top makers of telecom equipment, has been trying to expand in the U.S. It has met resistance because of concerns it could be tied to the Chinese government and military, which the company denies.
Last month the U.S. Commerce Department barred Huawei from participating in the development of a national wireless emergency network for police, fire and medical personnel because of “national security concerns.” A Commerce Department official declined to elaborate.
In February, Huawei withdrew its attempt to win U.S. approval for acquiring assets and server technology from 3Leaf Systems Inc. of California, citing opposition by the Committee on Foreign Investment in the United States. The panel reviews U.S. acquisitions by foreign companies that may have national-security implications. Last year, Sprint Nextel Corp. excluded Huawei from a multibillion-dollar contract because of national-security concerns in Washington, according to people familiar with the matter.
Huawei has operated in Iran’s telecommunications industry since 1999, according to China’s embassy in Tehran. Prior to Iran’s political unrest in 2009, Huawei was already a major supplier to Iran’s mobile-phone networks, along with Telefon AB L.M. Ericsson and Nokia Siemens Networks, a joint venture between Nokia Corp. and Siemens AG, according to MTN Irancell documents.
Iran’s telecom market, which generated an estimated $9.1 billion in revenue last year, has been growing significantly, especially its mobile-phone business. As of last year, Iran had about 66 million mobile-phone subscribers covering about 70% of the population, according to Pyramid Research in Cambridge, Mass. In contrast, about 36% of Iranians had fixed-line phones.
As a result, mobile phones provide Iran’s police network with far more opportunity for monitoring and tracking people. Iranian human-rights organizations outside Iran say there are dozens of documented cases in which dissidents were traced and arrested through the government’s ability to track the location of their cellphones.
Many dissidents in Iran believe they are being tracked by their cellphones. Abbas Hakimzadeh, a 27-year-old student activist on a committee that published an article questioning the actions of Iran’s president, said he expected to be arrested in late 2009 after several of his friends were jailed. Worried he could be tracked by his mobile phone, he says he turned it off, removed the battery and left Tehran to hide at his father’s house in the northeastern city of Mashhad.
A month later, he turned his cellphone back on. Within 24 hours, he says, authorities arrested him at his father’s house. “The interrogators were holding my phone records, SMS and emails,” he said.
He eventually was released and later fled to Turkey where he is seeking asylum. In interviews with the Journal, two other student activists who were arrested said they also believe authorities found them in hiding via the location of their cellphones.
In early 2009, Siemens disclosed that its joint venture with Nokia, NSN, had provided Iran’s largest telecom, government-owned Telecommunications Company of Iran, with a monitoring center capable of intercepting and recording voice calls on its mobile networks. It wasn’t capable of location tracking. NSN also had provided network equipment to TCI’s mobile-phone operator, as well as MTN Irancell, that permitted interception. Like most countries, Iran requires phone networks to allow police to monitor conversations for crime prevention.
NSN sold its global monitoring-center business in March 2009. The company says it hasn’t sought new business in Iran and has established a human-rights policy to reduce the potential for abuse of its products.
A spokesman for Ericsson said it delivered “standard” equipment to Iranian telecom companies until 2008, which included built-in lawful-interception capabilities. “Products can be used in a way that was not the intention of the manufacturer,” the spokesman said. He said Ericsson began decreasing its business in Iran as a result of the 2009 political upheaval and now doesn’t seek any new contracts.
As NSN and Ericsson pulled back, Huawei’s business grew. In August 2009, two months after mass protests began, the website of China’s embassy in Tehran reprinted a local article under the headline, “Huawei Plans Takeover of Iran’s Telecom Market.” The article said the company “has gained the trust and alliance of major governmental and private entities within a short period,” and that its clients included “military industries.”
The same month the Chinese embassy posted the article, Creativity Software, a British company that specializes in “location-based services,” announced it had won a contract to supply a system to MTN Irancell. “Creativity Software has worked in partnership with Huawei, where they will provide first and second level support to the operator,” the company said.
The announcement said the system would enable “Home Zone Billing”—which encourages people to use their cellphones at home (and give up their land lines) by offering low rates—as well as other consumer and business applications that track user locations. In a description of the service, Creativity Software says its technology also enables mobile-phone operators to “comply with lawful-intercept government legislation,” which gives police access to communications and location information.
A former telecommunications engineer at MTN Irancell said the company grew more interested in location-based services during the antigovernment protests. He said a team from the government’s telecom-monitoring center routinely visited the operator to verify the government had access to people’s location data. The engineer said location tracking has expanded greatly since the system first was installed.
An official with Creativity Software confirmed that MTN Irancell is a customer and said the company couldn’t comment because of “contractual confidentiality.”
A spokesman for MTN Group Ltd., a South African company that owns 49% of the Iranian operator, declined to answer questions, writing in an email, “The majority of MTN Irancell is owned by the government of Iran.” He referred questions to the telecommunications regulator, which didn’t respond.
In 2008, the Iranian government began soliciting bids for location-based services for the largest mobile operator, TCI’s Mobile Communication Co. of Iran, or MCCI. A copy of the bidding requirements, reviewed by the Journal, says the contractor “shall support and deliver offline and real-time lawful interception.” It also states that for “public security,” the service must allow “tracking a specified phone/subscriber on map.”
Ericsson participated in the early stages of the bidding process, a spokesman said. Internal company documents reviewed by the Journal show Ericsson was partnering with an Estonian company, Reach-U, to provide a “security solution” that included “Monitor Security—application for security agencies for locating and tracking suspects.”
The Ericsson spokesman says its offering didn’t meet the operator’s requirements so it dropped out. An executive with Reach-U said, “Yes, we made an offer but this ended nowhere.”
One of the ultimate winners: Huawei. According to a Huawei manager in Tehran, the company signed a contract this year to provide equipment for location-based services to MCCI in the south of Iran and is now ramping up hiring for the project.
One local Iranian company Huawei has done considerable business with is Zaeim Electronic Industries. “Zaeim is the security and intelligence wing of every telecom bid,” said an engineer who worked on several projects with Zaeim inside the telecom ministry. Internal Ericsson records show that Zaeim was handling the “security part” of the lawful-interception capabilities of the location-based services contract for MCCI.
On its Persian-language website, Zaeim says it launched its telecommunications division in 2000 in partnership with Huawei, and that they have completed 46 telecommunications projects together. It says they now are working on the country’s largest fiber-optic transfer network for Iran’s telecom ministry, which will enable simultaneous data, voice and video services.
Zaeim’s website lists clients including major government branches such as the ministries of intelligence and defense. Also listed are the Revolutionary Guard and the president’s office.
Mr. Gan, the Huawei spokesman, said: “We provide Zaeim with commercial public use products and services.” Zaeim didn’t respond to requests for comment.
—Margaret Coker and David Crawford contributed to this article.