Ewan Sutherland
LINK Centre, Wits University

13 February 2014






Complex engagements
Chinese operators and markets
China in Africa - telecommunications
Conclusion
Further resea...


Ming dynasty Imperial flotilla
Political initiatives in Africa:



Extractive industries:



Manufacturing expansion:...


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




Technology transfer by jo...
Ewan Sutherland, February 2014, LINK Centre, Wits U.

5
Ewan Sutherland, February 2014, LINK Centre, Wits U.

6
All mobile subscribers
(including 3G)
- Users (millions)
- Net additions (millions)
- Month on month growth

Of which 3G s...
Ewan Sutherland, February 2014, LINK Centre, Wits U.

8



Very rapid in customer numbers
GSM operators admit overstated numbers:
◦ Suggest each African has two SIM cards
◦ Cre...









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

Some handsets are from “leading” brands
Sold via recognised distribution channels
Also handsets with operator b...
2008

Global revenues

2009

2010

2011

2012

44,293

60,273

70,264

86,254 84,219

Of which from Africa

21.0%

11.4%

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

13










One of the few remaining monopolies
Massive contract
Equipment from Huawei and ZTE
Installed and maintai...
60
Liberia

Burkina Faso

Mobile connections per 100 persons

50

Sierra Leone

Rwanda
Mozambique
40

Niger
Chad
Cent. Afr...


Washington Consensus:
◦ Liberalisation
◦ Privatisation
◦ Regulation



China:

◦ Minimal market opening
◦ Three state-...


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



Namibia:
◦
...




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The state is a strong and often dominant
influence across the value chain
Protects service industries behind Gre...










Governments have limited ability to influence
multinational operators
A lot of lobbying, but little litig...




Need to explain differences in Chinese
government pushing equipment but not
operators or services
Cultural differenc...


Ewan Sutherland



Sutherla [at] gmail.com



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



+44 141 649 4040



Skype://suth...
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China in Africa - Issues for telecommunications - seminar at UNISA

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China in Africa - Issues for telecommunications - seminar at UNISA

  1. 1. Ewan Sutherland LINK Centre, Wits University 13 February 2014
  2. 2.      Complex engagements Chinese operators and markets China in Africa - telecommunications Conclusion Further research Ewan Sutherland, February 2014, LINK Centre, Wits U 2
  3. 3.  Ming dynasty Imperial flotilla Political initiatives in Africa:  Extractive industries:  Manufacturing expansion:  Beijing consensus:  Need to unpack:  ◦ Countering Western Imperialists ◦ Countering Soviet hegemony ◦ Seeking recognition against Taiwan (Chinese Taipei) ◦ Oil and gas ◦ Metal ores (e.g., Copper and Cobalt) ◦ Sometimes offered barter of infrastructure for ores ◦ Dominant supplier of goods ◦ Counter to Washington Consensus ◦ Win-Win for China and Africa ◦ African countries ◦ Chinese players (governments, private firms, traders, etc.) Ewan Sutherland, February 2014, LINK Centre, Wits U. 3
  4. 4.  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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 4
  5. 5. Ewan Sutherland, February 2014, LINK Centre, Wits U. 5
  6. 6. Ewan Sutherland, February 2014, LINK Centre, Wits U. 6
  7. 7. All mobile subscribers (including 3G) - Users (millions) - Net additions (millions) - Month on month growth Of which 3G subscribers - Users (millions) - Net addition (millions) - Month on month growth China Mobile China Unicom China Telecom Total 759.27 275.86 183.41 1,218.54 4.09 3.10 2.27 9.46 0.54% 1.13% 1.25% 0.78% UMTS cdma2000 176.02 115.39 99.58 390.99 6.52 3.76 3.10 13.38 3.84% 3.37% 3.21% 3.54% TD-SCDMA - Ewan Sutherland, February 2014, LINK Centre, Wits U. 7
  8. 8. Ewan Sutherland, February 2014, LINK Centre, Wits U. 8
  9. 9.   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) Ewan Sutherland, February 2014, LINK Centre, Wits U. 9
  10. 10.        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) Ewan Sutherland, February 2014, LINK Centre, Wits U. 10
  11. 11.      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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 11
  12. 12. 2008 Global revenues 2009 2010 2011 2012 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 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% Africa Ewan Sutherland, February 2014, LINK Centre, Wits U. 12
  13. 13. Ewan Sutherland, February 2014, LINK Centre, Wits U. 13
  14. 14.         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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 14
  15. 15. 60 Liberia Burkina Faso Mobile connections per 100 persons 50 Sierra Leone Rwanda Mozambique 40 Niger Chad Cent. Afr. Rep. 30 Comoros Malawi 20 DR Congo Burundi Ethiopia 10 Somalia Eritrea 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ewan Sutherland, February 2014, LINK Centre, Wits U. 15
  16. 16.  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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 16
  17. 17.  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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 17
  18. 18.     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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 18
  19. 19.        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 Ewan Sutherland, February 2014, LINK Centre, Wits U. 19
  20. 20.   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 20
  21. 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 21

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