The federal government says it is investigating the security implications of the sale by Cable & Wireless Optus of its $500 million satellite joint venture with the Australian Defence Force (ADF).
The sale of C&W Optus to Singapore Telecommunications could give the majority Singapore government-owned carrier control over the C1 satellite, to be used for highly-sensitive Australian military communications.
A spokesman for Federal Defence Minister Peter Reith said the government is aware a change in C&W Optus' ownership could have security implications.
"The government recognises that satellite communications are an important component of defence communications, and is aware that a change of ownership has implications for security," the spokesman said.
"As such, the government is exploring a variety of options to protect its investments and national security interests."
The spokesman noted that the planned $17.2 billion sale of C&W Optus to SingTel remained subject to recommendations from the Foreign Investment Review Board (FIRB). The $500 million C1 satellite, which has a 15-year lifespan, is scheduled for launch early in 2002.
When it announced the deal in 1999, C&W Optus said the Department of Defence would use half of the satellite's capacity for high bandwidth, long-range communications to support the ADF. The remaining half would be used for civilian commercial business.
A C&W Optus spokesperson said the sale of C&W Optus would not have any impact on the satellite joint venture. She said talks were being held with the Department of Defence to ensure it was comfortable with security arrangements.
"I believe there are talks going on at the moment just making sure that they're comfortable with security arrangements and so on," the spokesperson said. "But there always has been security arrangements. It's just making sure that they are fully briefed and fully comfortable, which we think that they are."
Industry experts said the satellite deal raised security concerns as the Singapore government had a long history of controlling SingTel's operations.
"I would think there would be alarm bells ringing left, right and centre," independent telco analyst Paul Budde said. "You have to be very careful about diplomatic links, and Singapore is a friendly country, but at the same time we all know the link between the (Singapore) government and SingTel is such that the government can basically access every single thing that SingTel is doing."
The Singapore government has a 78 per cent stake in SingTel, but has indicated it may reduce its share.
SingTel last week announced its $17 billion bid for C&W Optus, Australia's second largest phone company, following a drawn-out bidding process. The deal remains subject to shareholder approval and FIRB approval. The federal government has indicated it supports the sale.