Vodafone deepens Dubai ties fuelling security fears

Vodafone’s appointment of a non-executive director with UAE links should concern anyone who cares about national security

‘We need to think very seriously about opening the door to companies with track records that are distinctly dodgy’

THE chief executive of the United Arab Emirates’ state-owned telecoms company is to join Vodafone’s board in a move that will increase national security concerns about one of Britain’s critical infrastructure providers.

The FTSE 100 company has formed a new strategic partnership with statecontrolled e&, which has built up a 14.6pc stake in Vodafone.

As part of the deal, Hatem Dowidar, the e& chief executive, will be granted a seat on Vodafone’s board.

If the Abu Dhabi-based company increases its holding above 20pc, it will be able to nominate a second non-executive director to the British telecoms giant’s board.

The move prompted calls for the Government to scrutinise the relationship between the two companies, given e&’s ownership structure and past controversies. The company, also known as Etisalat, is 60pc owned by the UAE government. The country has attracted international condemnation for its use of online censorship and alleged attempts to spy on its citizens.

The UK High Court ruled in 2021 that Dubai leader Sheikh Mohammed bin Rashid al-maktoum had hacked into the phones of his ex-wife Princess Haya bint al-hussein as well as her staff during a custody row. Sheikh Mohammed is the prime minister of the UAE and has denied the allegations.

Sir Iain Duncan Smith, the former Tory leader, said: “The authorities need to think very seriously about opening the door to a lack of competition and some companies with track records that are distinctly dodgy.”

Closer ties with e& will add to security concerns surrounding Vodafone as it tries to push through a £15bn merger with rival Three, which is owned by Hong Kong-based CK Hutchison.

For a company that has spent the last 20 years lost in a sort-of corporate no-man’s land, Vodafone has no shortage of admirers. What a shame, then, that they are the sort that most sensible people would run a mile from. Yet Vodafone, for reasons that are yet to be made clear, seems determined to roll out the red carpet and ask a succession of unsuitable guests to make themselves at home.

The latest to bang on the window of Vodafone’s headquarters demanding to be let in is none other than e&, a name that some marketing whizzes employed by the United Arab Emirates presumably came up with in a vain attempt to make Etisalat – the telecoms arm of a repressive, militaristic state – sound more cuddly.

Though surely few other people would fall for such a feeble rebranding exercise, it seems the senior folk at Vodafone sadly have. How else to explain the decision to award a board seat to the boss of an outfit that is 60pc owned by the UAE?

There are many reasons why Vodafone, a vital national strategic asset, should not be aligning itself with such a regime. By the same token, it is hard to think of a single, convincing argument why it would – other than sheer desperation, naivety, or both.

Britain’s short-sighted “help yourself ” attitude to foreign takeovers has left swathes of critical infrastructure in the hands of overseas investors whose primary concern too often has been to further their own agenda to the detriment of British taxpayers.

In the last two decades, governments of all stripes have collectively surrendered control of most major industries. The water networks, key ports, major airports, steel, nuclear power and more recently, technology champions such as Arm, have all fallen into the wrong hands. And suddenly our telecoms sector looks increasingly vulnerable to ownership and influence from foreign investors that don’t have the country’s best interests at heart.

Vodafone’s announcement that it has appointed a representative of e& as a nonexecutive board director should concern anyone who cares about our national security. Vodafone isn’t just another faceless multinational that we can allow to be unduly influenced – or worse, controlled – by dangerous state actors. The misguided plans for its UK operations have been an unfortunate reminder of that.

Vodafone’s ill-advised UAE courtship comes on top of an equally unwelcome proposal to merge its mobile operations at home with rival operator Three, a company ultimately at the mercy of Beijing.

Three is owned by a private individual, Hong Kong’s richest man Li Ka-shing, who is also able to point to a string of British business interests that help to craft an image of a benign force at work.

However, Li has also spoken out in favour of China’s security crackdown in Hong Kong. As the Chinese Communist Party has shown in its clampdown on prominent tech tycoons, it is more than happy to impose its will on executives whenever it sees fit. In an era of growing hostility from Beijing to the West, calls by hawkish senior MPS such as Sir Iain Duncan Smith to block the deal are old-fashioned common sense.

Vodafone has been at the forefront of British telephony for decades. It controls, and has access to, untold quantities of personal data belonging to millions of UK citizens. It also works with the security services, holds important government contracts, and provides cyber security for critical national infrastructure, as well as operating vital undersea cables that carry internet traffic and are essential for smartphone connection.

It was on similar grounds that China’s Huawei was eventually booted off the telecoms network, though by the time the Government found the courage to act, its equipment was so embedded in phone mast sites and exchanges that the bill for removal is expected to be several billion pounds.

There is a danger we will make the same mistake again unless the Vodafone deal is examined and given the scrutiny it deserves under beefed up powers granted to ministers by the National Security and Investment Act.

It’s probably too early to be making such a drastic judgment about Etisalat, but there are still serious questions to be asked, both by ministers and the Vodafone board, about whether the UAE is a suitable partner for such an vital institution.

There is no shortage of red flags. Its record in telecoms alone is highly concerning. Online censorship is commonplace in the UAE, and often facilitated by Etisalat. The UAE government has also been accused of routinely spying on its citizens, while in 2009 Etisalat was accused of tricking Blackberry users into installing spyware by telling them it was a software update. The company said at the time that the “upgrades were required for service enhancements”.

Elsewhere, the UK High Court ruled in 2021 that Dubai’s ruler, Sheikh Mohammed bin Rashid al-maktoum, had hacked into the phones of his ex-wife Princess Haya bint al-hussein as well as her legal advisers and staff during a row over custody of their two children. He has denied the allegations. Sheikh Mohammed doubles as the prime minister of the UAE.

Yet nothing demonstrates the region’s potential to be a malign influence better than the mass sackings that occurred at P&O Ferries. The finger was pointed squarely at its ultimate owners, the Dubai ruling royal family – and this foreign ownership meant that there was little ministers could do. There should be no place for foreign investors so obviously willing to act against British interests.

‘Online censorship is common in the UAE, and often facilitated by Etisalat’