Mergers, Acquisitions and Financial Results

The Ethiopian Telecommunications Corporation (ETC) is examining project proposals from four European companies that include financing programs from governments and international banks, a service usually handled by ETC itself outside the bidding process.

The European companies who have submitted their proposals after finding financiers from different banks and governments are SIEMENS from Germany, ERICCSON from Sweden, NOKIA from Finland and ALCATEL from France.

ETC requires 2.4 billion dollars in financing for projects planned for the next four years. To secure the financing and quickly implement its ambitions, ETC is using a new strategy of allowing bidding companies a packaged deal whereby they find the financing for the projects concerned in conjunction with the work bid.

Though some observers see the new strategy as new and dynamic, it has already raised eyebrows as it apparently works against existing government procuremet low of inviting contending parties to participate in a public tender.

In the new system, the provider also becomes the de facto financier and, critics argue, bypasses a true public bidding process based simply on the merits of the work to be conducted.

"Regulations do not allow any purchases to be done by a governmental organization without a tender," a legal expert told Fortune. "ETC is violating the purchase regulations by contracting projects without going through the tender process. Though these are all developmental projects, ETC should still abide by the rules and regulations of the government."

The system is not altogether new in Ethiopian deal-making. It is was first developed by the Ethiopian Electric and Power Corporation (EEPCo) in their agreements with Salini Construction, the Italian construction giant, who solicited financing for the building of the Gilgel Gibe II, Gibe III and Beles hydroelectric dam projects on behalf of EEPCo as part of their overall proposal.

In its four year project, ETC plans to offers four million landlines from the existing 600,000 lines and two million mobile lines from the existing 600,000. It is also projecting to construct new telephone stations to reach around 15,000 rural kebeles.

According to Fortune's sources, the total budget submitted by the four companies is around one billion dollars. It is not yet clear however if these different financed bids compete with each other or provide separate portions of the work required by ETC. Fortune was told only that management will evaluate the proposals and negotiate with the concerned companies to reach an agreement in the next two weeks.

"Our company has secured a loan from the Belgian government, and other European banks for the mobile expansion, fibre optics technology, and rural telecom projects that ETC will be undertaking," said Samuel Giorgis, general manager of SIEMENS Ethiopia.

He did not want to comment on the loan amount and the name of the banks who agreed to help finance the projects.

Abdurahim Ahmed ETC's Communication Affairs Manager, said that the four European companies had submitted their proposals, but could not comment as the deals were still in negotiation.

Aiming to satisfy other portions of the Corporation's four year plans, on September 6, 2006 at the Sheraton Addis Hotel, Amare Amsalu, ETC's CEO, signed a memorandum of understanding with three Chinese companies; ZTE Corporation, Huawei Technologies Co. Ltd and China International Telecommunication Construction Corporation (CITCC). Under the same scheme being used by the European companies, these companies have found financing for ETC from the Chinese government for 1.5 billion dollars worth of projects.

Huawei Technologies Co.Ltd and ZTE Corporation will work on the mobile network expansion and wireless telephone technology while CITCC will work on fibre optics technology.

Addis Fortune