China in Africa - Issues for telecommunications - seminar at UNISA

China in Africa:Issues in telecommunications

Ewan SutherlandLINK Centre, Wits University

13 February 2014

Ewan Sutherland, February 2014, LINK Centre, Wits U 2

Complex engagements Chinese operators and markets China in Africa - telecommunications Conclusion Further research

Introduction

Ewan Sutherland, February 2014, LINK Centre, Wits U. 3

Ming dynasty Imperial flotilla Political initiatives in Africa:

◦ Countering Western Imperialists◦ Countering Soviet hegemony◦ Seeking recognition against Taiwan (Chinese Taipei)

Extractive industries:◦ Oil and gas◦ Metal ores (e.g., Copper and Cobalt)◦ Sometimes offered barter of infrastructure for ores

Manufacturing expansion:◦ Dominant supplier of goods

Beijing consensus:◦ Counter to Washington Consensus◦ Win-Win for China and Africa

Need to unpack:◦ African countries◦ Chinese players (governments, private firms, traders, etc.)

China in Africa


Massive growth in markets for ◦ Mobile telecommunications◦ Internet access◦ Broadband

Technology transfer by joint ventures Has become a major location for manufacturing:

◦ Handsets◦ Network equipment

Growing role in standardisation Massive investment in R&D Present in most activities

China – Telecommunications


Chinese network operators


China Mobile

China Unicom

China Telecom

Total

All mobile subscribers (including 3G)

- Users (millions) 759.27 275.86 183.41 1,218.54

- Net additions (millions)

4.09 3.10 2.27 9.46

- Month on month growth

0.54% 1.13% 1.25% 0.78%

Of which 3G subscribers TD-SCDMA UMTS cdma2000 -

- Users (millions) 176.02 115.39 99.58 390.99

- Net addition (millions) 6.52 3.76 3.10 13.38

- Month on month growth

3.84% 3.37% 3.21% 3.54%

Mobile subscribers – October 2013


Internet users in China


Very rapid in customer numbers GSM operators admit overstated numbers:

◦ Suggest each African has two SIM cards◦ Creates enormous space for them to grow

Large trans-national groups:◦ Etisalat (UAE)◦ Millicom (Sweden)◦ MTN (South Africa)◦ Orange (France)◦ Vodafone (UK)

Telecommunications in Africa


Loans (e.g., Export-Import Bank of China) Sale of network equipment (e.g., Huawei & ZTE) Network construction and management (e.g.,

CITCC) Sale of handsets and smartphones Exchange of voice telephony traffic and roaming VPN services for Chinese firms (e.g., Gateway) Absence of:

◦ Network operators (e.g., China Mobile)◦ Internet content firms (e.g., Alibaba, Tencent, & Weibo)

China in Africa – Telecommunications


Some handsets are from “leading” brands Sold via recognised distribution channels Also handsets with operator brands Smaller scale and grey market importers Enormous demand for cheapest handsets

A new silk road


2008 2009 2010 2011 2012

Global revenues 44,293 60,273 70,264 86,254 84,219

Of which from Africa 21.0% 11.4% 15.1% 12.4% 9.3%

Operating revenues

from Africa

9,311 6,861 10,639 10,678 7,821

Operating costs for

Africa

5,241 3,189 5,870 5,696 5,509

Gross profit margin 43.7% 53.5% 44.8% 46.7% 29.6%

ZTE in Africa (CNY millions)


China Communications Services Ltd


One of the few remaining monopolies Massive contract Equipment from Huawei and ZTE Installed and maintained by CITCC No money from Ethiopian government Substantial growth in customers Without competition on market Without good governance

Ethiopia


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

10

20

30

40

50

60Liberia

Burkina Faso

Sierra Leone

Rwanda

Mozambique

Niger

Chad

Cent. Afr. Rep.

Comoros

Malawi

DR Congo

Burundi

Ethiopia

Somalia

Eritrea

Mob

ile c

onne

ction

s per

100

per

sons


Washington Consensus:◦ Liberalisation◦ Privatisation◦ Regulation

China: ◦ Minimal market opening◦ Three state-owned companies competing◦ Coordination by ministry:

But manufacturers have a loud voice China in Africa:

◦ Ignore internal policies and Washington Consensus◦ Supports monopolies

Governance for oligopolies


Three space tracking stations outside China:◦ Swakopmund, Namibia◦ Malindi, Kenya◦ Karachi, Pakistan

Namibia:◦ Intergovernmental agreement, 2000◦ Built by Windhoek Consulting Engineers ◦ Estimated cost of NAD 12 million ◦ Opened, July 2001

Otherwise China uses Yuanwang (远望 ) class ships

Chinese Telemetry, Tracking & Command Stations


The state is a strong and often dominant influence across the value chain

Protects service industries behind Great Firewall of China

Operators and content providers tightly bound to censorship regime

Pursuing strategic goals overseas:◦ Africa is a major market for low priced

telecommunications ◦ Africa is a source of important minerals◦ Africa is a key market for manufactures

Conclusion - China


Governments have limited ability to influence multinational operators

A lot of lobbying, but little litigation Ineffective regulation Nonetheless, telecommunications has been

transformed Increasingly Chinese equipment Often Chinese construction and

maintenance Even countries with little progress in

liberalisation show progress

Conclusion - Africa

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Need to explain differences in Chinese government pushing equipment but not operators or services

Cultural differences on the ground:◦ African and Chinese managers◦ Lobbying with Chinese characteristics

Relationship to resource contracts◦ If any?

Flows of money around equipment contracts

Value for money

Ewan Sutherland, February 2014, LINK Centre, Wits U

Further research

21

Ewan Sutherland

Sutherla [at] gmail.com

http://www.ssrn.com/author=927092

+44 141 649 4040

Skype://sutherla

Ewan Sutherland, February 2014, LINK Centre, Wits U

Thank you

China in Africa - Issues for telecommunications - seminar at UNISA

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