U.S.-Chinese tech struggle opens new front in Ethiopia

A US-backed consortium defeated a China-funded consortium in a closely watched telecommunications auction in Ethiopia, giving Washington a victory in its attempt to challenge Beijing’s economic influence in the world.

The East African country said on Saturday it had hired a group of telecommunications companies led by Britain’s Vodafone Group PLC to build a national 5G-capable wireless network. The group had secured financial backing for the multibillion-dollar project from a newly formed US foreign aid agency.

The agency offers low-interest loans, but the financing comes with a condition: the money will not be used to purchase telecommunications equipment from Chinese companies Huawei Technologies Co. and ZTE Corp..

Washington considers both a spy threat, a charge the companies deny.

The losing bidder was the South African group MTN Group Ltd.

, whose proposal was funded in part by a Chinese investor.

The Ethiopia telecommunications license auction has taken on broader geopolitical importance amid heightened competition between the United States and China in key technology activities, from 5G deployment to chipmaking.

“The United States and China are waging a proxy war in Ethiopia for their influence,” said Zemedeneh Negatu, chairman of Fairfax Africa Fund LLC, a US-based investment firm that focuses on Africa.

After all, but by excluding Huawei in the United States, Washington has become more confident that it wants to question Beijing’s economic footprint abroad. It uses new financial tools to gain influence and keep the strategic assets of foreign countries in friendly hands.

Johannesburg-based MTN, the continent’s largest telecommunications company and long-time customer of Huawei and ZTE, said it had made its offer in partnership with China’s Silk Road Fund, which holds investments from the China Development Bank of Beijing and the Export-Import Bank of China.

The backer for Vodafone’s offering was the International Development Finance Corp., or DFC. The US government-funded agency was established in December 2019 with the aim of providing alternatives to cheap Chinese financing for foreign infrastructure projects.

The Ethiopian government, which wants foreign investment and competition to improve its often spotty cellular service, had the option of accepting both offers, one or none. “This marks the start of a new era in our country,” says Ethiopian Communications Authority tweeted on Saturday after announcing the successful bidder.

At the end of 2020, the DFC approved the offer of up to $ 500 million in US loans if the Vodafone-led group wins the offer. However, he is not obligated to proceed with the transaction. The United States separately lobbied Addis Ababa to allow humanitarian groups access to Ethiopia’s Tigray region, where violent conflict has led to what the United States calls ethnic cleansing.

Ethiopia sent federal troops late last year, accusing the dominant political party of trying to divide the country. A representative of Prime Minister Abiy Ahmed did not respond to a request for comment.

A billboard from the political party of Ethiopian Prime Minister Abiy Ahmed in Addis Ababa.


eduardo soteras / Agence France-Presse / Getty Images

The DFC said on Friday, ahead of the auction results, that it was working closely with other US government agencies to monitor the situation in Tigray and “would carefully consider its impact on any potential funding for the Vodafone consortium.”

If financing were to go ahead, American loans would carry interest rates much lower than those of commercial banks. The idea is to help the carrier buy equipment from non-Chinese suppliers, such as Ericsson AB,

Nokia Corp.

or Samsung Electronics Co.

Their equipment is often more expensive than Huawei or ZTE hardware, according to wireless executives and U.S. officials.

U.S. law also prohibits its loan from being used to purchase Huawei or ZTE hardware, although a person familiar with the matter said it was possible that the offer led by Vodafone could still purchase Chinese hardware due to the size and cost of the project.

Over the past two decades, Ethiopia has developed trade bonds with Beijing, signing loan agreements with Chinese lenders totaling $ 13.7 billion between 2000 and 2018, according to the Research Initiative. on Africa in China from Johns Hopkins University. About $ 3 billion went to telecom infrastructure projects with ZTE and Huawei.

Ethiopia, meanwhile, is also an important strategic ally of the United States due to its location near the Red Sea in the Horn of Africa. The United States has attempted to neutralize terrorist groups, including Al Qaeda and Islamic State, in the region.

Chinese-American battle for economic influence

Write to Stu Woo at [email protected] and Alexandra Wexler at [email protected]

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