ZTE of China Bids for $1.3 Billion Ethiopian Telecom Contract
By William Davison
(Bloomberg) — ZTE Corp., China’s second-largest maker of phone equipment, has bid for a contract worth about $1.3 billion to improve Ethiopia’s telecommunications network as it seeks to build its presence in the Horn of Africa nation.
The company, based in Shenzhen, is competing with Huawei Technologies Co. for work that will include boosting the capacity of Ethiopia’s mobile-phone network to 50 million subscribers in 2015 from 20 million now, Zhang Yanmeng, chief executive officer of ZTE’s Ethiopian operations, said in a May 21 interview in the capital, Addis Ababa. The contract is expected to be awarded within a month, he said.
ZTE, about one-third owned by the Chinese government, has worked with Ethiopia’s state-owned monopoly provider Ethio Telecom over the past six years to improve phone and Internet services in Africa’s second-most populous nation.
“Huawei and ZTE see all of Africa as worthwhile,” Deborah Bräutigam, a professor at the School of International Service at American University in Washington, said in an e-mail. “Africa is part of what made Huawei one of China’s most successful multinational companies.”
Ethiopia offers higher returns than elsewhere in African because there is no competition, and non-Chinese suppliers haven’t been able to compete, she said. Bräutigam is author of “The Dragon’s Gift: The Real Story of China in Africa.”
ZTE provided most of the financing for a deal signed in 2006 worth about $2 billion, Zhang said. Its work helped boost the capacity of the mobile-phone network 20-fold to 20 million subscribers and introduced wireless Internet networks, he said.
Expectations of growth in Ethiopia’s market size justify investment in the industry, Zhang said.
`Big Potential Market’
“We look at it positively,” he said. “The politics is stable, economic activity is very good and, if we look at the huge population, it’s a big potential market.” Ethiopia’s population may be 93.8 million in July and is growing at 3.2 percent a year, the fifth-fastest rate in the world, according to the CIA World Factbook.
Revenue at Ethiopian Telecom surged six-fold to 12 billion Ethiopian birr ($680.2 million) over the past five years, according to Zhang. It may reach 50 billion birr in 2015, he said. France Telecom SA manages Ethio Telecom.
It will be “no problem” for ZTE to access as much as $900 million of credit if it wins the $1.3 billion contract, Zhang said.
Last year, ZTE’s Ethiopian office opened Tana Handset Factory in Bahir Dar, capital of the Amhara region, with TIRET group. The plant has the capacity to produce as many as 3 million mobile phones a year that will cost about 370 birr each, he said.
“We will look after it until it becomes a big success in five years,” Zhang said. TIRET is owned by the Amhara National Democratic Movement, which is a member of Ethiopia’s four-party ruling coalition.