Myanmar's military has given the go-ahead for a local company to own most of Norwegian telco Telenor's operations in the country, under a deal to be finalised shortly, communications seen by Reuters show.

Civil rights groups said the deal could put the data of 18 million people within the junta's reach.

The new information reviewed by Reuters shows Shwe Byain Phyu will own 80% of the unit under a handover expected to be concluded within days. Lebanese investment group M1 will own the rest.

Shwe Byain Phyu's chairman, Thein Win Zaw, has a history of business ties to the military, including, most recently, as an investor in Mytel, an army-owned telco, undated corporate records seen by Reuters show. Reuters could not establish the size of the stake Thein Win Zaw held in Mytel and if he still holds it.

Kyaw Myo Aung, a representative of Shwe Byain Phyu, who said he was speaking on behalf of the directors and chairman, said the group was a "family-owned private business" with "no links to the military or generals".

In a brief phone conversation, he said Telenor had "selected the company the most unrelated to the military". Reuters was unable to ask Kyaw Myo Aung about whether the group would preserve the privacy of user data as part of any deal.

A spokeswoman for Telenor told Reuters by email that it had had no dialogue with Shwe Byain Phyu and its sale agreement was only with M1, which was "the only party we have selected".

M1 Group did not answer phone calls seeking comment and Myanmar's military did not respond to requests for comment about the deal.

Telenor sought to leave Myanmar after last year’s military coup and the company told Reuters in September it was selling its operations to avoid European Union sanctions after "continued pressure" from the junta to activate intercept surveillance technology.

Its departure has been mired in difficulty.

Military leaders late last year rejected its plan to sell its local operations to M1 for $105 million.

Instead, they wanted M1 to partner with Shwe Byain Phyu, three sources familiar with the matter told Reuters.

 

'UNACCEPTABLE CONSEQUENCES'

Some civil rights groups and two employees of Telenor Myanmar told Reuters the new deal with Shwe Byain Phyu must be stopped to protect Telenor's 18 million customers in the country.

One customer filed a complaint against Telenor, which is majority-owned by the Norwegian state, on Monday with Norway's data protection agency.

The person, who requested anonymity from the agency when they made the complaint, citing safety concerns, said they were trying to stop a dangerous transfer of sensitive user data through the sale.

Norway's data protection agency told Reuters it had received the complaint and would examine it. The agency cannot block the sale but could fine Telenor if it finds the company has breached rules related to data protection.

Responding to the complaint filed with Norway's data protection agency, the Telenor spokeswoman said European Union data protection laws did not apply as Telenor headquarters "does not exert any control on the handling of customer data by Telenor Myanmar".

Two employees of Telenor Myanmar, who also asked not to be named, citing safety considerations, told Reuters this week that authorities had requested the call logs of people they had detained in connection with opposition to last February's coup when the military seized power and the last known location of people on the run.

They said Telenor had complied.

"We're angry and scared," one of the employees said. "We believe after the sale (Telenor) will give customers' data to the military."

Telenor's spokeswoman said it was not possible for Telenor to comment on directives from the military, due to risks to employees.

The spokeswoman said deleting customer data would be a breach of Telenor's telecoms licence in Myanmar and "violating or not complying with local regulations under the existing legal framework would have severe and completely unacceptable consequences for our employees".

 

A SERIES OF DICTATORS

In the months before last February's coup, telecom and internet service providers were secretly ordered to install intercept technology that would allow the army to eavesdrop on the communications of citizens, Reuters reported in May.

According to the communications seen by Reuters and two people briefed on the matter, the new deal will sell Telenor's Myanmar unit initially to Investcom Pte Ltd, a joint venture with 51% of shares owned by M1 and 49% by the local firm. Subsequently, 31% will be transferred to Shwe Byain Phyu while M1 will own the rest.

In an email on Tuesday the spokeswoman for Telenor said the company is awaiting regulatory approval for the sale of its unit and did not comment "on speculation in the market".

"In the sales process, assessments of human rights, privacy and the safety of our employees have been key considerations," she said.

A series of military dictators ruled Myanmar from 1962 until 2011, when reforms began that authorities said were intended to usher in a transition to democracy, up-ended by last year's Feb.1 coup.

With its first company established in 1996, Shwe Byain Phyu was a petroleum importer and distributor with the military regime then in power as a client, before expanding into commodities trading and manufacturing, its website shows.

Chairman Thein Win Zaw was a director of Mahar Yoma Public Company, a consortium that had a stake in the military-owned telco Mytel, corporate records show, Reuters reported in November.

A day after Reuters' report was published, Thein Win Zaw stepped down as director of the firm, according to corporate records. Reuters could not determine the reason for his departure.

(Additional reporting by Thu Thu Aung and Gwladys Fouche and Victoria Klesty in Oslo; editing by Barbara Lewis and Carmel Crimmins) ((poppyelena.mcpherson@thomsonreuters.com;))