India's largest telecom vendors including Airtel, Vodafone and Idea Cellular use SIM cards supplied by Gemalto, the world's biggest maker of mobile-phone chips and provider of secure devices such as smart cards and tokens. Online publisher The Intercept in its report named Idea Cellular as one of the networks from which the spy agencies accessed encryption keys.
"Phone calls and text messages by military, government, diplomats, spy corporations and by ordinary citizen of India - all of those get affected by this hack," said Pranesh Prakash, Policy Director at research and advocacy firm Centre for Internet and Society.
The Intercept, which accessed top secret documents provided by NSA whistleblower Edward Snowden, said American and British spies dug into the private communications of Gemalto engineers and other employees to steal encryption keys.
Gemalto provides security services such as two-factor authentication and access management, and has hundreds of clients in India. The company in 2012 said it provided 25 million e-driver's licences and vehicle registration certificates in India that let the government "consolidate driver and vehicle registration information across the population in a central repository".
"We believe that the biggest risk stands for the large number of Vodafone users in the country as the company has deployed Gemalto's Near Field Communication services solutions to provide secure and convenient 'wave and pay' contactless transactions via mobile phone," said Sanchit Vir Gogia, Chief Analyst and Group CEO, Greyhound Research.
"We have no further details of these allegations, which are industry-wide in nature and are not focused on any one mobile operator. We will support industry bodies and Gemalto in their investigations," said a Vodafone spokesperson in an email response.
Emails to Idea and Airtel were unanswered till the time of going to Press.
"Indian operators typically go for cheaper Chinese vendors that are anyway low on security. Among the European SIM vendors, Gemalto has the largest share in India," said a senior mobile services executive, requesting anonymity.
The report on the hack comes at a time when Gemalto was looking to tap the Indian market, including e-governance initiatives. The company in a recent email to ET said it had plans to expand its center of excellence in India to develop multiple products, offer tech support and provide security solutions for the domestic market.
"We take this (breach) very seriously and will devote all resources necessary to fully investigate and understand the scope of such highly sophisticated attacks to obtain SIM card data," a Gemalto spokesperson said. "The target was not Gemalto, per se - it was an attempt to try and cast the widest net possible to reach as many mobile phones as possible."
Initial investigations indicate that SIM products as well as banking cards, passports and other products and platforms are secure, the company said. Gemalto is expected to announce the results of its investigation on Wednesday. British and US spy agencies have been under fire for hacking and spying on citizens after Snowden in mid-2013 began leaking documents that revealed massive surveillance programmes by the two governments. At the time, the Indian government said the NSA was only collecting meta-data and had no access to the actual contents of phone calls or text messages.
Experts suggest a multinational consensus or treaty that strikes a balance between national security concerns and privacy.
"Governments will have to debate this in the United Nations and some kind of rules for surveillance, maybe treaties, are relevant in the future," said Kamlesh Bajaj, Chief Executive at Data Security Council of India. "They shall have to have some kind of a limit to surveillance. They can't be vacuuming all data in the name of finding a needle in the haystack."
Sunil Abraham, Executive Director at Center for Internet and Society, suggested the Indian government should replace proprietary operating systems and Android on phones with pure free software projects, use of virtual private network on phones to carry voice and data traffic, and encrypt voice and data payloads separately.
"When it comes to all the other services provided by Gemalto, the India government should insist that they will do key management on their own. This will also mitigate the compromise of Gemalto's enterprise networks by the NSA," he said.
