Ethiopia signs $800 million mobile network deal with China's ZTE

ADDIS ABABA Sun Aug 18, 2013 3:01pm EDT

The ZTE company logo is seen as a guest delivers a speech during the company's 15th anniversary celebration in Beijing April 18, 2013. REUTERS/Barry Huang

The ZTE company logo is seen as a guest delivers a speech during the company's 15th anniversary celebration in Beijing April 18, 2013.

Credit: Reuters/Barry Huang

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ADDIS ABABA (Reuters) - Ethiopia signed an $800 million deal with China's ZTE 000063.SZ on Sunday to expand mobile phone infrastructure and introduce a high-speed 4G broadband network in the capital Addis Ababa and a 3G service throughout the rest of the country.

The agreement with ZTE, China's second-largest telecoms equipment maker, is half of a $1.6 billion project split with Huawei Technologies Co Ltd HWT.UL, the world's second largest telecom equipment maker. Huawei signed the agreement last month.

Both firms will provide low interest loans to Ethiopia through an arrangement known as vendor financing, Ethiopian officials and both firms said.

Africa's rapidly expanding telecoms industry has come to symbolize its economic growth, with subscribers across the continent totaling almost 650 million last year, up from just 25 million in 2001, according to the World Bank.

China has extended its economic influence on the continent in recent years, winning road construction tenders in Kenya, signing deals for construction of energy projects in Uganda as well as running mining projects in various countries.

Andualem Admassie, acting chief executive officer of state-run Ethio Telecom, said the agreement would enable the Horn of Africa country to double subscribers to more than 50 million.

"The expansion is vital to attain Ethio Telecom's objective of increasing telecom service access and coverage across the nation, as well as to upgrade existing network to new technology," he said in a speech.

Ethio Telecom is the only mobile operator in the country of more than 80 million people, one of the last remaining countries on the continent to maintain a state monopoly in telecoms.

Although lacking much of a telecoms industry, the government last year gave approval for private companies to provide value-added services - all services other than standard voice calls.

The Ministry of Communications and Information Technology says it has received applications from more than 200 firms to provide such services.

South Africa's MTN Group (MTNJ.J), Africa's largest mobile phone company, has already been granted a license.

The government has ruled out liberalizing its telecoms sector saying the 6 billion birr ($321 million) it generates each year is being spent on railway projects. Ethiopia plans to build 5,000 km of railway lines by 2020.

(Reporting by Aaron Maasho; Editing by Duncan Miriri and Alison Williams)

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Comments (1)
brush2914 wrote:
I think this is not the optimal route given the rampant corruption at the telephone monopoly. I betcha there is some sort of kick back without the knowledge of the govt as numerous bureaucrats at the Monopoly have fled with massive loot. The govt is better off either selling half of the monopoly for an efficient private company with proven track record and letting the management oversee the operation or selling the same percentage to the public through floating stock. This will lay the foundation for a transparent, regulated stock market like in Nairobi, Cairo and Shanghai. In either case, the govt will get up to 2 billion dollars judging by prevailing price to earning ratios. According to the Prime Minister, the govt is getting a paltry 400 million birr( 20 million US) profit from a dismal performer like the EthioTelecom. Ten times that much can be gotten from an efficient run prolific enterprise and significant amount when there is stock transaction or dividend payout or the mother of all ‘cash cows’ capital gains tax on any appreciation in stock value when it changes hand. Some of the stock can be used to finance the burgeoning pension liability of the govt which, for now doesn’t seem to have a designated source of financing. Only very few connected interlopers are amassing up to 100% dividend from having owned stocks in mostly speculative private banks, while the Diaspora are shun as other progressive investors who would love to invest in a country like Ethiopia. The govt should revisit this as a precursor to establishing a vibrant private equity market. Absent tht , it will be deja vue as corruption is rampant in many spheres given the low base salary for most officials. Imagine a billion dollar deal being signed by an executive earning $200 US tops.

Aug 19, 2013 2:54am EDT  --  Report as abuse
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