Two Chinese firms are neck and neck to grab the highest portion of Ethiopian telecommunications

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Chinese telecommunication multinationals ZTE Corporation and Huawei Technologies have recently signed new contractual agreements after longstanding negotiations, ending months of speculation.
It was disclosed that the two year expansion project is part of the Ethiopian development blueprint Growth and Transformation Plan (GTP), aimed at elevating the country to a middle-income level. The new project is designed to boost the country’s mobile subscribers to the 50 million mark. The two Chinese firms are said to be sharing the USD 1.6 billion dollar contract equally and both have already been awarded different projects.
 

The recent decision to move from a single supplier to what the government called the wise approach of bringing in both Huawei and ZTE ended longstanding procedural arrangements. It is hoped that the upcoming expansion projects will resolve the service quality problems that have gone unaddressed for years. The two telecom giants were neck and neck for months in an attempt to grab the higher portion of Ethiopia’s telecommunications contract, particularly the 4G network expansion for Addis Ababa.
 

In fact, Debretsion Gebremichael (Ph.D.), the Communication and Information Technology minister, recently said that the 4G project has been awarded to Huawei. However, ZTE deny the claim, saying that it has not been formally notified and the negotiations for the Addis Ababa project are ongoing, while announcing that it is expanding its efforts nationwide. With regards to such speculation, the latest agreement signed between ZTE and Ethio telecom and its future plans for Ethiopia’s ICT prospects, Yonas Abiye and Yohannes Anberbir of The Reporter sat down with ZTE’s Deputy CEO Qiao Liang (Charles) for an interview. Excerpts:

 The Reporter: During the past few years, ZTE has been involved in multi-billion dollar telecom expansion projects in Ethiopia. Recently, you have signed a new contractual agreement worth USD 800 million. Are you happy with the latest arrangement?


Qiao Liang: We have no reason to be unhappy. We are really happy with the new deal. A strategic partnership is what we have built with the Ethiopian government; it’s a good opportunity for us to be part of this project. We were willing to sign this contract and want to go into the implementation phase quickly. Ultimately, these projects are all about serving the government of Ethiopia and the society as a whole.

This agreement was expected to be signed few months ago, around April or May. Why was it postponed until now? Although officially it was said to be procedural issues, there were also rumors that you and Ethio telecom had problems agreeing on some of the conditions of this contract. Is this true?

Once we knew this project was essential to the country, we had to make preparations of our own as ZTE. So we have been working hard to complete these preparation. This duration, of course, took a little bit longer than expected because of the complexity of the technology. Furthermore, the government wants to have the best technology installed and that was part of the strict requirement for the selection process. That is an essential part of the work, and it takes time. So, that was the actual issue with the delay. The bidding procedure was very long and complicated, ranging from the technical proposal, hardware requirements, commercial issues, negotiations, technical evaluations and so on. There are many issues in the bidding procedure, since we are talking about a very big project. All parties are expected to be very sensitive to details and issues. But our (ZTE and Ethio telecom) target is the same. That’s it.

But even before the signing of this contractual agreement, the negotiation process between ZTE, Ethio telecom and your main contender Huawei took more than a year. Finally, both ZTE and Huawei obtained half of the USD 1.6 billion project. However, part of the project to introduce a 4G network to Addis Ababa was granted to Huawei, while ZTE was rumored to have been seeking to maintain this part more than any other parts of the project. Was it easy to concede, given ZTE's track record as the sole contractor in the network industry for close to seven years in Ethiopia?

Honestly, we have been the sole partners to Ethio telecom for many years now. We do respect the decision of the government or Ethio telecom. So, from ZTE's side, we treat the entire network equally and will deliver the network on the standards demanded of us. That’s what I can say.

Your company has been handling customer service for the past five years. For instance, the network signal we are using in our cell phones is from your company. But, there have been frequent technical problems and network interruptions; generally a low quality service.  As a result, almost all the subscribing customers blame Ethio telecom, who in turn contracted your company to do the job. Hence, you are also a direct party in this problem. Do you think this could be part of the reason for you to lose the 4G project in Addis Ababa?

For this point I think your Prime Minister (Hailemariam Desalegn) and Minister of Information and Communication Technology (Debretsion Gebremichael Ph.D.) have given enough explanations to the various parts of the government and the society at large. So, it is an honor to be involved and still remain a partner in the Ethiopian telecom project. I think we will see real changes after the implementation of the projects in the pipeline.

The latest project is expected to commence shortly. And you are partially involved in the nationwide 3G network expansion project. So are you promising a high quality service?

The expansion project will increase the capacity, supporting 2G and 3G networks. For instance, the number of customers supported by the classic 2G network is expected to be more than 50 million, while the number of users for the 3G network is expected to reach around 6 million. Actually, it is the decision of the government to increase the coverage in line with the next GTP planning. I think, if we could finish the whole project on time, the whole of Ethiopia will enjoy a high speed, efficient and quick telecommunication service.

What exactly would your (ZTE) stake be in the new expansion project?

So far we haven’t had clear instructions from Ethio telecom and government as to what the full scope of our role would be in this project. But whatever the decision, we would fully respect it. Of course, from the ZTE side, we would like to get more projects and more of highland areas.

Are you telling me Ethio telecom has not given you details of what parts of the projects you will be taking over?

So far, no. We haven’t had any kind of official information regarding this matter. The agreement was only on the mere principles. We know nothing more at this stage.

So negotiation is still underway, even after the signing of the project agreement. Is that what you are saying?

There might be some negotiation or Ethio telecom could also make the decision directly, without any negotiation.

But during your signing ceremony, while Huawei inked the deal, it was disclosed that ZTE would be restricted to security related parts of the project, with customer services handed over to Huawei?

That is just the general principle I told you about. But, even so, we are still grateful to the government for trusting us with the security part of the project. We had to be grateful because the government has shown us that it trusts ZTE to do the security. We are given the most sensitive part. So, we have nothing but gratitude for the trust the government has bestowed upon us.
 

You mean the government granted the security part because ZTE was more trustworthy?

I think the fact that ZTE is a publicly owned company has something to do with trust.

Beyond the telecom sector, there are other projects that ZTE is currently involved in; for example a project with the Ministry of Education. However, there are rumors that the ministry has recently canceled the net project concerning 120 schools in Ethiopia that ZTE was contracted to?

I am not sure where you are getting your information, but we have not been informed of any decision to terminate the project. As the contractor, ZTE has been working on this project, and we haven’t had any official notice about whether this project is going to be canceled or discontinued.

So are you working on it now?

Yes.

When are you going to complete this project and submit it to the ministry?

I can say the project is moving along well. We keep frequent communication with the relevant section of the government and ministry regarding this particular project. We have to be fully respectful, and abide by the rules and regulations of the government, including procurement laws. So at this point, at least without full authorization of the government, I could not disclose further information regarding this project.

What are your future plans and overall prospects with respect to the telecom and IT sectors in Ethiopia, beyond your latest projects?

The first and primary target for ZTE in Ethiopia is to deliver the best, highest quality network services to the government and the country as a whole. At the same time, we are going to provide more services in the ICT area. We also have big plans with respect to the localization of technologies in the country, and help in the process of technological transfer and capacity building. We want to empower local staff by delivering training and transferring the basic skills. We also want to do the same to schools, universities, government agencies and the like.

Recently, a number of international telecom companies are coming to Ethiopia seeking a share of the pie. But still the Chinese companies like yourselves and Huawei dominate the local market. How did you manage that? Is it because you offer a cheap service for the government? Or a better service?

The whole bidding process was conducted healthily and transparently, right up until the time of selection. We are just one of the bidders and competitors in the project. We obeyed the rules and regulations during the evaluation process. ZTE has been here for the past 10 years. If ZTE did something bad, it would not have been here all this time. So, the government’s decision was based entirely on the truth and analysis of these facts.

As the sole telecom contractor, you have been the only foreign company allowed access to country's telecom sector. Now, you seem to have another contender, how do you see this new trend?

We respect the multi-vendor policy direction taken by the government.

Now you have bitter competition from Huawei, which is expanding across other African countries. Do you think this is a threat for you? For example, you have already lost Addis Ababa’s project to Huawei.

We have signed very fair and very reasonable contract with Ethio telecom. Ethio telecom is our employer for this project. So on our side, we are definitely committed to fulfilling what we have promised and the agreed terms and conditions of the contract.

But before signing this contract, ZTE had a strong desire to fully control projects in Addis Ababa. Don’t you think you are facing a fierce contender regarding your stake?

We know there is competition everywhere, globally. This is just one case, we are competing everywhere around the world. ZTE started operating 25 years ago as a very small company. Now it’s a giant enterprise. It is through such fierce competition that we made it.

You have been taking part in Ethiopia’s development blueprint (the GTP) for the past three years and managed good working relations with government. But, what are the challenges you have ever encountered in Ethiopia as a foreign company?

Ten years back, when we were working here as foreign company, there were challenges. Back then, we had a good relationship with the public, the society, government, employees and we have had the various job. With Ethiopian staff, our team here, we have a rich experience together with the Chinese staffs here. We are confident for the next job.

What is your position regarding the government's vendor financing policies? You have already handled USD 1.5 billion projects on this system, are you comfortable with this arrangement?

Actually, it is just one kind of commercial modality. Other kinds of commercial modalities include: buyers’ credit, sellers’ credit, soft loans and so on. We have to decide, we have to negotiate based on the background of each different project. So far it is not a problem. Source (Reporter) 

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