In Global Tech Battle, a Balky U.S. Ally Chooses China
The Philippines has chosen Chinese companies to expand its telecoms network, shunning warnings about security risks
By
Niharika Mandhana
July 15, 2019 11:51 am ET
MANILA—The U.S.-China technology war is raging around the world, but the Philippines is no longer torn. It is binding its telecommunications future to China’s.
The country got its first taste of next-generation 5G services in late June with gear supplied by Huawei Technologies Co. This month, a new carrier backed by state-owned China Telecommunications Corp. will begin rolling out a network largely designed in China, to be executed by Chinese engineers in the Philippines.
The moves are a blow to the U.S., which has in recent months
. U.S. officials contend Chinese companies could be compelled to conduct espionage for Beijing.
As countries like the Philippines reject pressure from Washington, Chinese companies are embedding themselves deep in strategically important infrastructure. These developments tie countries to Beijing through a
, from economic growth to military planning.
Huawei, which has repeatedly said it wouldn’t spy for China, estimates its 5G equipment will spread across more than 130 countries, including in Europe. Huawei’s 5G system is up and running in South Korea and will be deploying in the United Arab Emirates this year. Both countries are U.S. allies.
Chinese companies’ dominant presence in Philippine telecom networks stands to move the Southeast Asian country further away from the U.S., its treaty ally—testing a relationship that has already grown strained.
In Blow to U.S. the Philippines Chooses Chinese Technology
Secretary of State Mike Pompeo said on a trip to Manila in March that, “America may not be able to operate in certain environments if there’s Huawei technology adjacent to that.” Other officials have since warned that the U.S. could curtail information it shares with the Philippines over concerns data could be stolen by Chinese companies.
The deal with China Telecom is part of a foreign policy shift under President Rodrigo Duterte, who has expressed distrust of the U.S. He has pursued Chinese investments and played down his country’s disputes with Beijing in the South China Sea, dismissing warnings he is giving China greater control over the contested waterway.
Mr. Duterte has come under international scrutiny for his
in which tens of thousands of people have allegedly been killed. Human-rights groups have raised alarms over
, which Mr. Duterte denies.
Philippine President Rodrigo Duterte, left, and Chinese President Xi Jinping in Beijing in April. Photo: Kenzaburo Fukuhara/Kyodo News/Getty Images
After taking office in 2016, one of Mr. Duterte’s early priorities was to improve his country’s telecom services. Citizens have long complained that phone and internet services are slow and unreliable.
With his push, the Philippines introduced a new telecom company in which China Telecom holds a 40% stake—the maximum permitted under Philippine law. Mr. Duterte has said he is counting on it to speed up internet connectivity in a market long controlled by two carriers.
Philippine officials say the venture, Dito Telecommunity Corp., will benefit from China Telecom’s experience serving hundreds of millions of subscribers in China, as well as its deep pockets. China Telecom will take the lead on technical operations, said Adel Tamano, a spokesman for Dito Telecommunity. Its local partner, the Udenna Group, has no telecom experience, with business interests in other areas such as shipping, logistics and real estate.
“A lot of the work has been done outside the country, in China,” said Mr. Tamano. Chinese engineers will oversee technical matters for at least three years, until their Filipino counterparts are trained, he said.
China Telecom is eager to acquire a majority stake, said Eliseo Rio Jr., an undersecretary in the Philippine government’s information and communications technology department. To make that happen, the government is seeking to lift foreign-ownership limits. An amendment is pending approval in the Philippines Congress.
China Telecom said it supports the government’s initiative and that its future investment strategy in the venture will depend on how it progresses.
Tom Uren, a cyber-specialist at the Australian Strategic Policy Institute, a think tank, said a Chinese telecommunications firm could enable hackers by helping them gain entry into a network, or simply by sharing how it is configured. Chinese engineers could duplicate data, read unencrypted correspondence or even bring down phone services to sabotage Beijing’s opponents.
If a conflict broke out, “it’s almost impossible to imagine China wouldn’t take advantage of its position” as a telecom partner, he said.
A Filipino telecom executive who works closely with cybersecurity teams said: “When those who could potentially threaten your network are inside running it, you’re as vulnerable as you can be.”
U.S. Secretary of State Mike Pompeo, right, and Philippines Foreign Secretary Teodoro Locsin Jr. in Manila in March. Photo: andrew harnik/press pool
China Telecom said in response that the new Filipino telecom operator is “deeply committed to the security of its network.” The consortium will “ensure it handles user data in strict compliance with the data-protection regulations,” it said.
China’s foreign ministry said those raising questions about the China Telecom venture were “trying to politicize normal business cooperation.”
In a 2018 paper, researchers at the U.S. Naval War College and Tel Aviv University said China Telecom had “hijacked” internet traffic flowing in and out of the U.S. on several occasions in 2016 and 2017 and redirected it through China. Such a diversion could allow Beijing to copy information-rich traffic and exploit it, co-author Yuval Shavitt said.
Of the Philippine venture, he said: “You’re letting them into your home, so the bottom line is, you trust them.”
China Telecom said the hijacking allegations are unfounded and resulted from “erroneous routing configuration” by another operator.
Mr. Tamano said Dito Telecommunity plans to spend $5 billion in five years on its network: “If this is a spying venture, it is a very expensive spying venture for something they can do a lot more cheaply.”
The group has hired a former Philippine military general with expertise in signals and communications to beef up cybersecurity. Under pressure from lawmakers, the government is taking its own measures. It has signed up New York-based
Inc. to install cyberintelligence tools into the network, said Mr. Rio, the communications technology official. Intrusions or diversions would alert the company as well as authorities.
