When we met at Deutsche Telekom's main office in Berlin, Michael Bartsch could barely contain his excitement over the company's newest mobile phone.

"We can't say which countries we've been contacted by," the 40-something executive who is head of mobile security for the telecom company, said. "But security people from embassies have called us asking for devices to test out. In fact, we've been getting calls from everyone, even from outside the EU."

On the mahogany conference table in front of Bartsch lay a panoply of the smartphones he uses, modifies, and ultimately tries to market: an iPhone 5s, a Blackberry Z10, and what looked, to the casual observer, like last year's Samsung Galaxy S3.

But, in fact, the unassuming Galaxy was actually a Samsung device running the Korean company's secure Knox version of Android, which Telekom has modified with its own security software, called SimKo.

An earlier variant is the phone that Chancellor Angela Merkel uses. And Telekom wants to sell it to you – or your government, or your company, or to anyone looking to migrate away from American and British technology solutions in the wake of the NSA spying scandal. But critics of the initiative say that equally secure products can be had for a fraction of the cost, and that Deutsche Telekom's ties to the German government make SimKo problematic for potential foreign government buyers.

Telekom's SimKo project was born in 2004 at the behest of the German government, which owns a 32% stake in Telekom. It wanted a solution that would encrypt data and eventually voice traffic on 10,000 civil servants' government-issue phones – both when they communicated with one another on the phones and when their phones were connected to the government's secure email network.

After five years of research, the first SimKo phone, a modified HTC Touch Pro 2 running Windows Mobile 6.5, was released in late 2009. It could encrypt text messages and email, but voice traffic was left unencrypted because at the time telecom providers thought the encryption built into their 3G networks was robust enough to thwart hacking. This was wrong, as the Berlin-based Chaos Computer Club group proved in late 2009, when it easily hacked into 3G networks.

This incident sent Deutsche Telekom looking for another solution – and it came in the form of Samsung's Knox-enabled phones, which were unveiled this year at the mobile phone industry's annual trade show in Barcelona. Presently Knox is only available commercially for the Galaxy Note 3 "phablet"; the Galaxy S3 and S4 require an update that hasn't been provided yet.

Software like Knox solves the critical flaw in the "bring your own device" (BYOD) movement – where employees using their (insecure) personal phones open business presentations or upload company documents to services like Dropbox.

Samsung puts two distinct operating systems on the same device – a "secure" version of the Linux operating system (SE Linux), where an employee's encrypted email and files are isolated and linked to a company's secure cloud; and a normal version of the Android OS, where the user can run personal apps such as Facebook.

Employees like Knox because they can use it for both work and play; employers like it because they always have control over the secure side of the phone, which they can remotely monitor or wipe if an employee leaves a company.

Samsung's platform is aimed primarily at the US Department of Defense, which said this past spring that it plans to buy 600,000 "secure classified and protected unclassified mobile solutions that are based on commercial off-the-shelf products." Government-wide purchases of secure smart phones could eventually reach 8m devices in the US – and Samsung, as the largest maker of Android phones, hopes to grab a big chunk of that business. At present the DoD lists only BB10, Apple's iOS 6 and Samsung's Knox as having met its requirements for mobile security.

So keen is Samsung to garner US government contracts that it developed the Knox platform almost entirely to US government specifications, with particular emphasis on modifying the open-source SE Linux programming language to meet Department of Defense requirements. The company says in its whitepaper: "Samsung R&D teams have worked very closely with the NSA to port and integrate this technology into Android. This port of SE Linux to Android is commonly referred to as Security Enhancements for Android, or 'SE for Android'."

Knox phones destined for the US Department of Defense are given an extra layer of security by General Dynamics and defence software contractor Fixmo. Both companies are adding voice encryption and special authentication protocols that allow the devices to sign on to secure government networks like the DoD's SIPRNet, which was where the WikiLeaks diplomatic cables were stored.

But can an American chief executive or the President of Brazil get one of these ultra-secure Knox phones from General Dynamics? Unlikely. An employee at General Dynamics G4, who asked not to be quoted by name, said the devices that it modifies for the government "are based on software technology that goes to the root of the phone. Our technology is not used by other countries".

This is where Deutsche Telekom hopes to fill a niche. It's adding a similar, extra security layer to its phones as well. And it says it will sell the same device that it makes for Angela Merkel – the Merkelphone – to anyone willing to pay the €1,700 asking price.

Telekom's version of the Samsung Knox encrypts all voice and data traffic into and out of the phone with a cryptocard made by cergate and software by NCP, both based in Nürnberg. The phone's L4 microkernel is made by Berlin-based Trust2Core, a start-up that Telekom owns, in a partnership with the Technical University of Dresden and Dresden-based Kernkonzept.

A microkernel is essentially a bespoke package of code that "provides basic memory management, task and context switching, and little else". This core is very difficult to infect with malicious code, so it's well suited towards keeping the two operating systems separate, while at the same time allowing both OSes to share storage memory and components, like the screen, camera, or microphone.

Telekom's Bartsch said the company assumes that attempts will be made to hack into its systems.

"We assume that there are organisations that want to obtain information, like the NSA. The NSA has every piece of technology that exists to decode security keys in a relatively quick timespan," Bartsch said.

For this reason, he said the company creates a new secure key to all its SimKo devices everyday. Telekom's assumption is that code breakers would need longer a longer than a day to crack their keys.

"We change the security keys every 24 hours," Bartsch explained. "Every morning at 4am, the system cuts off all VPN connections, creates a new key, and then reconnects with the gateway."

But privacy experts in the US and Europe are critical of the initiative. They say the system is at best an expensive executive toy, and at worst problematic for foreign governments due to Telekom's ties to the German government.

A German chief executive, whose company sells interception systems for phone and internet networks in 80 countries, praised Telekom for not engaging in warrantless wiretaps against people within Germany – but pointed out that it would be perfectly legal for Germany's spy agency, the BND, to ask Telekom for information about its foreign clients or for information about global organisations based in the country that might be breaking laws.

"I have not seen any proof that the BND is doing any tapping inside Germany – it's a typical play by the books, cover-your-ass organisation," the executive told me. "But if a bank here is increasing its mail traffic to North Korea, that would be interesting. Or if an organisation is communicating a lot with Afghanistan – maybe that's drug trafficking. You'd have to ask the BND, of course, but I'd say that would be fair game."

Christopher Soghoian, principal technologist at the American Civil Liberties Union, notes that Europe's telecom operators have a poor track record of defending net neutrality and data protection, and tend to do their governments' bidding when asked.

"I would think that Telekom gives the same level of help to the German government as AT&T does to the US government. Like all telecoms around the world, when a government says jump, they jump." And he notes that even in the unlikely event that Telekom can assure potential foreign clients that it won't snoop on them, the system is still too expensive – and thus, small – to be relevant.

"Even VIPs call her husbands and wives," Soghoian noted. "Both ends of the call have to be on this platform for it to work. Unless the security is deployed internationally and nationally, it's not going to work. It's not going to help you if you can only talk to a few thousand people."

When asked about its ties to the German government, Bartsch said the company ordered the Samsung Knox phones it sells with an interchangeable cryptochip slot to address this very fear.

"Yes, this is a German solution, approved by the government's standards office. But it can be combined with other countries' security standards too. Countries that buy the platform from us can manufacture their own cryptochips to work with this phone, so they would hold their own encryption keys," Bartsch said.

But the German tech executive who sells interception hardware pointed out that SimKo is expensive compared to secure voice and text chatting apps such as Silent Circle and RedPhone which are available at a fraction of the cost.

"The compartmentalising aspect of SimKO is useful. But other apps work just as well. I trust Phil Zimmermann's [inventor of Silent Circle] background and history. Microphone logging could be an issue through a backdoor in the Android or Apple iOS – in that case, Silent Circle wouldn't help you. But most business people will never have to worry about this problem."

In its marketing of SimKO, Telekom is using the tag line "superior privacy Made in German." And this is not altogether surprising – German tech companies are trying to capitalise on what is seen as a massive breach of trust in their America competitors.

The person spearheading this effort is Rene Obermann, Deutsche Telecom's CEO. This autumn, Obermann has hosted data privacy conferences and written op/ed pieces in which he has called for Germany to wall off its internet from the US, and to create Europe-only clouds. Yet, while seemingly championing online privacy in Europe, another division of the company he runs – T-Mobile USA – serves as an active partner in the U.S. government's massive dragnet targeted against U.S. citizens.

German tech blog Netzpolik pointed out this incongruity at the beginning of the NSA/Snowden leaks affair. It asked Deutsche Telekom whether Obermann knew about T-Mobile's longstanding agreement with the US Justice Department when he declared this past summer that "We are not cooperating with foreign intelligence services."

The company's response: "Of course Deutsche Telekom cooperates with intelligence services, when obliged by law to do so."

And that is, of course, the same line that Google, Yahoo, Microsoft, AT&T and Verizon – Telecom's competitors in the secure enterprise space – have used throughout this NSA scandal.