[Cancelled Portion] China Eximbank provides $800 million export seller's credit to ZTE for on-lending to Ethio telecom in support of Telecom Transformation and Expansion 6 Circles Project (Linked to Project ID#69387 and ID#86927)
Constant 2017 USD
Not recommended for aggregates
This project is not recommended for use in creating aggregated sums. See the documentation for more information about this criteria.
Funding agency [Type]
Export-Import Bank of China [State-owned Policy Bank]
Communications (Code: 220)
Supplier's Credit/Export Seller's Credit
On January 10, 2013, ZTE Corporation and Ethio telecom — a state-owned telecommunications company in Ethiopia — signed an $800 million supplier credit agreement for the Telecom Transformation and Expansion 6 Circles Project. On the same day, Huawei Technologies Co., Ltd. and Ethio telecom signed an $800 million supplier credit agreement for the Telecom Transformation and Expansion 7 Circles Project. ZTE Corporation and Huawei Technologies Co., Ltd. reportedly secured a $1.6 billion export seller’s credit from China Eximbank and then used the proceeds of the export seller’s credit to on-lend to Ethio telecom. Both supplier credits carried identical borrowing terms: a 13 year maturity, a 3 year grace period, and an annual interest rate of 6-month LIBOR plus a 1.5% margin. The interest rate that applies to each supplier credit (1.988%) was calculated by taking the average 6-month LIBOR rate during the month (January 2013) when the supplier credit agreement was issued (0.488%) and adding a 1.5% margin. The borrower was to use the supplier credit proceeds to finance a $1.6 billion commercial contract it signed with ZTE Corporation and Huawei Technologies Co., Ltd. in July 2013 for the Telecom Transformation and Expansion Circles Project. The Government of Ethiopia did not issue a sovereign guarantee in support of the supplier credit issued by Huawei Technologies Co., Ltd. or the supplier credit issued by ZTE Corporation. The purpose of the Telecom Transformation and Expansion Circles Project was to (a) provide fourth generation (4G) technology, a broadband technology allowing browsing speed of 100mb per second in Addis Ababa; and (b) enable third generation (3G) services across the country. Ethio telecom divided the country into 12 infrastructural zones (‘circles’), and made one vendor (Huawei Technologies Co., Ltd.) responsible for 7 circles and another vendor (ZTE Corporation) responsible for 6 circles. Therefore, the project consisted of two sub-projects: the Telecom Transformation and Expansion 7 Circles Project (implemented by Huawei Technologies Co., Ltd.) and the the Telecom Transformation and Expansion 6 Circles Project (partially implemented by ZTE Corporation). The sub-project overseen by Huawei Technologies Co., Ltd. entered implementation without any known contractual disputes with the project owner (Ethio telecom). However, the sub-project overseen by ZTE Corporation was plagued by a contractual dispute with the project owner. According to Deputy Prime Minister Debretsion Gebremichael, ZTE Corporation declined to work on the swapping of an old network in the capital city of Addis Ababa and asked for an additional $150 million for the service. Mekuria Haile, Ethiopia’s Minister of Urban Development and Housing Construction (and Chair of the Ethio telecom Board) eventually terminated Ethio telecom’s agreement with ZTE Corporation in April 2014. Then, Ethio telecom approached Nokia and Ericsson with an offer to work on the project together and take responsibility for three circles each. This resulted in a deal with Ericsson. According to Debretsion Gebremichael, “Nokia did not respond to our offer, so we continued negotiations with Ericsson.’’ Ericsson proposed a $550 million deal for four circles (the south, south west, south east and south south circles) and a credit agreement with a 10 year maturity and a 7.5% interest rate. The interest rate and the maturity were adjusted after negotiation between the two parties, but they both remained higher than the interest rate and the maturity in the supplier credit agreement with ZTE. After ZTE learned that the Government of Ethiopia was negotiating with Ericsson, it requested to work on the project again by agreeing to include the network swapping in the initial project cost. Hours before Andulem Admassie, chief executive officer (CEO) of Ethio telecom, and Rafiah Ibrahim, president of Ericsson for the Middle East and North East Africa region, finalized a deal for the four circles sub-project, ZTE Corporation and Ethio telecom signed a new agreement that gave it responsible for the two remaining circles (east and middle east circles). Given that the Ericsson deal ultimately involved the provision of a $550 million credit for four of the six circles in the original $800 million sub-project, AidData assumes for the time being that the $800 million supplier credit agreement with ZTE Corporation was revised to $250 million. The $800 million supplier credit that Huawei Technologies Co., Ltd. issued for the Telecom Transformation and Expansion 7 Circles Project is captured via Project ID#69387. The cancelled portion ($550 million) of the $800 million supplier credit that ZTE issued for the Telecom Transformation and Expansion 6 Circles Project is captured via this project, ID#30884. The uncancelled portion ($250 million) of the $800 million supplier credit that ZTE issued for the Telecom Transformation and Expansion 6 Circles Project is captured via Project ID#86927.
Ethio telecom is owned by the Ethiopian government and maintains a monopoly over all telecommunication services in Ethiopia.
Number of official sources
Number of unofficial sources
Receiving agencies [Type]
Ethio Telecom [State-owned Company]
Implementing agencies [Type]
Ethiopian Telecommunications Corporation [State-owned Company]; Government of Ethiopia [Government Agency]; ZTE Corporation [State-owned Company]