Just over a couple of weeks ago the GSM encryption was broken, now the 3G encryption it seems is no longer secure. The transition to 3G networks and their more secure encryption algorithm was one of the ways some downplayed the importance of breaking the GSM encryption.
The original algorithm intended for UMTS is called MISTY1, but was too computationally intensive, so it was replaced by a revised version called KASUMI (Japanese for “mist”). The new algorithm was supposed to be easier on the hardware, but not any less secure.
It turns out that’s not the case.
An attack on the algorithm has decoded the encryption; however, it takes 2 hours on a regular computer to break the encryption. So, it doesn’t enable real-time eavesdropping (at least not using a single computer), but the researches that broke the code say their implementation wasn’t optimized, so there’s probably room for improvement.
More coverage: Gizmodo, ePrint, Arstechnica