Ethiopia joins hands with Ericsson to Facilitate Telecommunication Sector

Following the termination of the deal with ZTE, Ethiopia has now signed a deal with Ericsson.

An eight-month negotiation was confirmed by awarding Swedish based telecommunications firm, Ericsson, the $500-$550 million telecom project. The contract is part of the project that was taken away from ZTE.

Primarily, a project was launched for the renovation and extension of telecom services with a total project cost of 1.6 billion dollars in 2013. The contract was signed with two Chinese competing network solution providers ZTE and Huawei Technologies, by splitting the project into 13 circles. The two companies were bestowed the multi-vendor financing project of 800 million dollars each after they secured the financing from the Export-Import Bank of China (EX-IM) with a maturity period of 13 years at a three percent interest rate.

Primarily, a project was launched for the renovation and extension of telecom services with a total project cost of 1.6 billion dollars in 2013. The contract was signed with two Chinese competing network solution providers ZTE and Huawei Technologies, by splitting the project into 13 circles. The two companies were bestowed the multi-vendor financing project of 800 million dollars each after they secured the financing from the Export-Import Bank of China (EX-IM) with a maturity period of 13 years at a three percent interest rate.

Huawei was awarded seven circles, one in the capital and the remaining in regional states of the Country. The remaining six circles were given to ZTE. Following the financing agreement, Huawei started the optimisation in Addis Abeba but ZTE did not start the work because of a disagreement with the state monopoly, after it declined to work on the swapping of the old network, according to Debretsion Gebremichael (PhD), in the rank of Deputy Prime Minister, Coordinator of the Finance and Economic cluster and Minister of Communication and Information Technology.

ZTE's refusal to work on the swapping of the old networks, and the demand for an additional 150 million dollars for the service, led Ethio telecom's board, chaired by Mekuria Haile, Minister of Urban Development and Housing Construction, to terminate the framework agreement signed with ZTE on April 2014, Fortune confirmed.

After the termination of the contract with ZTE, the state monopoly approached Nokia and Ericsson, with an offer to work on the projects together, taking three circles each. At the end, a deal was signed with Ericsson.

"We approached the two companies because they have been interested in working in Ethiopia, as they have approached us at different times in the past," says Debretsion. "Nokia did not respond to our offer, so we continued negotiations with Ericsson."

Ericsson proposed 550 million dollars for the four lots, by coming up with a financing structure that has a maturity period of 10 years, with a 7.5% interest rate, according to sources. The interest rate and the maturity period were eventually adjusted after negotiation between the two parties, although both remain higher than the figures in the deal with ZTE.

"The difference is not that significant," Debretsion said. After the officials of ZTE knew that the government of Ethiopia was negotiating with Ericsson, they apparently requested to work on the project again, by agreeing to include the swapping with the first project cost, ZTE officials although refused to give further details on the issue.

"We were going to shift the whole project from ZTE, but the time framework scheduled for the finalisation of the project is June 2015, and Ericsson said that it could finalise all four circles within the remaining six months," said Debretsion.

The agreement with Ericsson was signed on December 16, 2014 at Hilton Hotel, between Andulem Admassie, Chief Executive Officer (CEO) of Ethio Telecom, and Rafiah Ibrahim, President of Ericsson for the Middle East and North East Africa region. The event was attended by Mekuria, Debretsion and Jan Sadek, Swedish ambassador to Ethiopia. The new project that is designed with Ericsson includes expansion, overhauling, swapping and provision of technologies for four circles, including south, south west, south east and south south circles, while ZTE retains the east and middle east circles.

Hours before this deal, we signed a contract with ZTE for the remaining two circles, Andulem told Fortune. In addition to the circles, ZTE will work on transmission, power deployment, business and security, Andualem informed.