German govt cancels Verizon contract in wake of U.S. spying row

BERLIN, June 26 (Reuters) - The German government has cancelled a contract with U.S. telecoms firm Verizon Communications inc as part of an overhaul of its internal communications prompted by the row over United States government spying.

Reports last October based on disclosures by former U.S. intelligence contractor Edward Snowden that Washington had conducted mass surveillance in Germany.

Berlin subsequently demanded talks with Washington on a "no-spy" deal, but these collapsed after the United States appeared unwilling to give the assurances Germany wanted.

"The pressures on networks as well as the risks from highly-developed viruses or Trojans are rising," Germany's Interior Ministry said in a statement on Thursday.

"Furthermore, the ties revealed between foreign intelligence agencies and firms in the wake of the U.S. National Security (NasdaqGM: NSEC - news) Agency (NSA) affair, show that the German government needs a very high level of security for its critical networks."

The government said Deutsche Telekom AG (Berlin: DTE.BE - news) would replace services provided by Verizon (NYSE: VZ - news) , and noted the German company was already responsible for the most sensitive communications between ministries or between the government and German intelligence agencies.

According to reports and documents published last year, Verizon was obliged by U.S. intelligence to turn over international and domestic calling records of its customers. Verizon is the second-biggest U.S. telephone company behind AT&T (Berlin: SOBA.BE - news) Inc in terms of revenue.

Verizon was not immediately available for comment. (Reporting by Thorsten Severin; Writing by Alexandra Hudson; Editing by David Holmes)