Spy chiefs have reportedly briefed ministers that Huawei hardware bought by BT could be hijacked by China to cripple the UK's communications infrastructure.
At a meeting in January, Alex Allan, chairman of the Joint Intelligence Committee, told the Home Secretary that while BT had taken steps to secure its network, "we believe that the mitigating measures are not effective against deliberate attack by China", the Sunday Times reports.
Huawei, led by former People's Liberation Army (PLA) research chief Ren Zhengfei, is a major supplier to BT's ongoing multi-billion-pound 21CN network upgrade. It will see all voice and data traffic carried by the same packet-switched equipment. In 2005 the Chinese firm won contracts to provide access nodes and optical equipment for the core of the new network.
At the meeting, ministers were told that the UK government had "not paid sufficient attention to the threat [from Huawei] in the past". At the time of the 21CN deal, feted by Huawei executives as offering "significant benefits for the UK", GCHQ reportedly warned that the BT network was used by government departments, the military and intelligence services, and would be a prime target for any future Chinese attack.
Despite consistent denials, western intelligence services believe Huawei has close ties to the Chinese military. Fears in Washington over the alleged relationship last year scuppered its attempt to acquire US telecoms equipment maker 3Com.
Huawei's bid partner, the investment firm Bain Capital Partners, pulled out when a Congressional committee indicated it would block the $2.2bn takeover. Security chief raised particular concerns about 3Com's TippingPoint division, which is closely involved in secure US government networks.
Now it seems UK intelligence officials believe there is a risk that China may have used its influence on Huawei to ensure 21CN is vulnerable to a remote attack. The risk is reportedly deemed "low", but a secret Whitehall report says "the impact would be very high".
They reportedly want the Chinese components of 21CN to be replaced with more trusted equipment, but ministers are reluctant to act, citing competition law. Huawei beat British firm Marconi to supply BT.
Patricia Hewitt, who now sits on BT's board, declined to intervene in the deal as trade and industry secretary in 2005.
At January's meeting, ministers were told security advice given to BT has cut the risks to 21CN from malicious hackers but the unspecified measures would not mitigate built-in vulnerabilities. Intelligence officials reportedly said they could not offer specifics on a potential Chinese strike, as they had "only limited understanding of our adversaries' attack capability".
China has made great efforts to become a major commercial technology player. As well as hosting manufacturing and research facilities for many of Huawei's western rivals, last year the Pentagon noted strengthening ties between Chinese firms and the PLA. ®