In what is perhaps the most tangible damage done to US business by the National Security Agency spying dragnet, the German government said today it would end a contract with Verizon Communications Inc. (NYSE:VZ) due to security concerns.

Verizon communications

Critics attack NSA’s Prism monitors

The controversial NSA program called Prism monitors phone calls and can enter into individual smart phones and turn on microphones to eavesdrop. This is routinely done overseas without a warrant, and critics charge this is the case in the US as well. The program, which was said to be well known in the intelligence and terrorist community, was later revealed in widespread fashion by Edward Snowden.

The massive NSA program of individual spying did not detect the Boston Marathon bombing plot and has not been able to identify widespread terrorism in Nigeria or the Middle East, leading critics to claim it is a high risk proposition with little reward. The risks are in building the most sophisticated spy apparatus in the history of the world that could fall into the wrong hands. But the risks are also tangible and economic.

Verizon’s business to be transferred to Deutsche Telekom

The German Interior Ministry said they will transfer all business done with Verizon Communications Inc. (NYSE:VZ) to a German-based competitor, Deutsche Telekom AG (ADR) (OTCMKTS:DTEGY) (ETR:DTE), by 2015. The controversy was ignited recently by reports in Germany that the NSA had access to Verizon’s data, which fanned outrage in Germany, a report in the Wall Street Journal noted.

“The relationships between foreign intelligence agencies and companies revealed in the course of the NSA affair show that especially high demands must be made of federal government communications infrastructure that is critical for security,” the Interior Ministry said.

Verizon Communications Inc. (NYSE:VZ), which generates most of its revenue in the US market, had made a push to expand into overseas markets recently. This development and their relationship with the NSA puts these plans in jeopardy. A Verizon spokesperson did not comment directly to the Wall Street Journal, but did say their German subsidiary complied with German law, indicating that the US government did not have access to customer data stored outside its legal domain. A German Interior ministry official would not provide the size of the contract, but said it was to provide some federal agencies networking services.  Verizon did not provide services to German security services, the official was quick to point out.