Ethiopia is an important strategic base of ZTE in Africa. ZTE made its first entrance into the Ethiopian market as early as 1996 and the business volume has been on steady rise since then. Ethiopian Telecommunications Corporation (ETC) is the only state-owned monopoly telecom operator of Ethiopia that runs the telecom network throughout the country. In 2006, ZTE and ETC entered the stage of substantial cooperation.
The Ethiopian Prime Minister Meles Zenawi highly praised ZTE for its excellent performance in the ETC’s millennium project: “The Great Wall is a symbol of China, and the opening of the national mobile network in Ethiopia has an equal significance as that of the Great Wall to Chinese people. You have done a marvelous job! We have full confidence in ZTE, and I hope you will continue to work miracles in Ethiopia.” In order to enter the non-replicable miracle, the reporter had a telephone interview with Mr. Zhang Yanmeng, CEO of ZTE’s Ethiopian subsidiary.
When asked to introduce the project of ZTE in Ethiopia, Zhang described its feature in one sentence, “This is the world’s only project in which a national telecom network is built by a sole equipment supplier”. Then he started to elaborate the development of ZTE in Ethiopia in recent years.
According to him, ZTE entered the telecom market of Ethiopia in 1996 and officially set up its Ethiopian Office in 2000. Some small projects had been signed and implemented between 2003 and 2005 but a substantial breakthrough had not been made until 2006. In the Sino-African Cooperation Forum in 2006, the Ethiopian government put forward a cooperation program between ZTE and ETC, which rested on a three-year sole supplier framework agreement between both parties and financed on seller credit.
The project involved 1.8 to 1.9 billion USD of investment—1.5 billion USD for equipment and 0.4 billion USD for engineering construction. After both parties signed the framework agreement in November 2006, ZTE began technological exchange with ETC in full swing, so as to determine development prospect of Ethiopian telecom in the coming three years and offer ETC a complete solution tailored to its network construction. The construction of ETC’s national telecom network consists of three phases: The first phase is the Ethiopian millennium project, starting from April 2007; the second phase focuses on the GSM and IP-based systems that cover the cities and roads; the third phase starts from October 2008 and covers the countryside and remote areas.
Zhang spoke with deep feeling on the project and summed up its five characteristics. Firstly, it is a huge scaled project that consists of over 20 sub-projects, 70-80% of which are big projects involving a great sum of investment.
Secondly, the complicated network architecture is a major difficulty we faced at the beginning of project planning. As the existing network of ETC was constructed by multiple equipment suppliers, there was no unified network planning at the beginning and the network structure became very complicated. Besides, our technical agreement with ETC involves multiple categories of products, which makes network design and planning difficult at the very beginning.
Thirdly, it is a turnkey project that includes fiber installation and building of towers and shelters, which brings great difficulty in engineering construction, especially at the third phase of the project when the network needs to cover 90% of the entire Ethiopia.
Fourthly, it places a great pressure on the project construction cycle. For a project with a total investment of 1.8 to 1.9 billion USD, the reasonable cycle of project construction would be five years. As the Ethiopian project will be ended in 2010 according to our agreement, the only three years of project construction is a tremendous pressure for us.
Finally, ETC engineers are not competent enough to independently undertake the operation and maintenance work after the network is built and put into commercial use. Therefore, we have to help them operate and maintain the commercial network for a considerable time.
The five characteristics Zhang mentioned above have put tremendous pressure on the project execution. In particular, the millennium project of the first phase, signed in April 2007 and required to be completed by August 2007, had to be finished within four months, including contract signing, site survey and design, production scheduling, as well as equipment transportation, installation and debugging. What made it even more difficult was that the project was executed in Ethiopia’s rainy season. Many people called it “Mission Impossible”. However, facing all the difficulties, we worked out the most suitable plan, kept on working day and night, and successfully completed the first phase of the project before September 11, 2007, the Ethiopian Millennium. The Prime Minister of Ethiopia spoke highly of this project, “This is unprecedented in the Ethiopian telecommunications history”.
Excellent Project Management Capability
The Ethiopian project is a turnkey project that requires not only outstanding technical solutions but also comprehensive project capabilities including professional large project management, engineering service and project delivery. With seven years of working experience in Africa, Zhang presented his unique view and in-depth understanding of overseas project implementation.
According to Zhang, the large project management capability played a very important role in the implementation of the Ethiopian project because it was an end-to-end delivery that involved a great variety of products in such a short time span of implementation. Being the Director of the Project Steering Committee, ZTE CEO Mr. Yin Yimin himself took charge of the project to ensure a prompt communication and quick response to the decision. In addition, we established three professional teams: commercial affairs team, technical solutions team and contract delivery team, which also played an important role in the project implementation. The commercial affairs team did a great job in communicating with our customers and making commercial decisions; the technical solutions team was responsible for offering a total technical solution, solving the technical barriers and ensuring a manageable, maintainable and operable network; the contract delivery team did well in logistics, engineering and outsourcing. On the whole, ETC was quite satisfied with our excellent performance in the project.
From the perspective of engineering service and delivery, Zhang considers that there are four major risks in overseas project implementation, including customer selection, technical solution, logistics and engineering construction.
Zhang said the customer selection involved the customer’s cooperation, business operation and team building capabilities. Being the only monopoly telecom operator in Ethiopia, ETC has received great support from the government; and ETC itself has good operation capacity that can be a great help to us during the project implementation. Therefore, the choice of ETC is a prerequisite for smooth business processes.
Besides, a sound and feasible technical solution is key to the success of the project. From the first day the project was initiated, our after-sales engineering execution team participated in the before-sales support, for the purpose of controlling the risk and ensuring smooth operation. This is very important to the project and also the successful experience we have gained.
The third risk lies in logistics that includes production cycle and delivery capability. Since we realized the potential logistics risk at the beginning, we established an experienced, professional logistics execution team, and made a specific logistics and delivery plan for each sub-project in advance, so as to guarantee smooth logistics operations.
The fourth risk is project outsourcing. In 2007, there was virtually no telecom subcontractor in Ethiopia. In order to cope with the huge-scaled project, we determined to introduce several subcontractors in the first phase of the project, expanded the subcontractor team members in the second phase, and developed a complete cooperation with them in the third phase. Currently, we have five telecom design institutes, twelve engineering construction companies, and three to five engineering supervision agencies engaged in our project in Ethiopia. Such a powerful outsourcing support is a guarantee for smooth implementation of our Ethiopian project.
In addition, the training of our project managers is of great significance. Although we have built a good platform in terms of technical solution, customer relationship, logistics and project outsourcing, it is quite important for the project managers to have the decision-making and overall project control and planning abilities for each sub-project. Therefore, the training of after-sales project managers is a very important subject for us. Through the training, they can reach a consensus on the project management.
Enhancing Knowledge Transfer for Mutual Benefit
ZTE has taken the lead in the industry in localization service, and established overseas training centers in many countries to provide training service. In the 2006 Sino-African Cooperation Forum, China and the African countries signed a contract to train 15,000 technical personnel in various fields for Africa, and ZTE undertook a significant role in the cooperation.
Zhang told us that, as part of the training cooperation initiative, ZTE had launched a one-thousand-technical-expert training program for Ethiopia. ZTE had provided telecom equipment worth 7-8 million in the project, which covered almost all the company’s product lines, and at the same time ZTE had provided a powerful teaching staff. There are four reasons for this.
Firstly, the overall education of Ethiopia is relatively weak, especially in the field of telecom engineering, where systematic and professional training have been lacking. However, the government pays much attention to skill improvement and capability development. Ethiopia is the only African country with the Ministry of Capability Construction, regarding capability development as a resource. If ETC does not have a powerful network maintenance team, the later phase development of the network will be prone to potential hazards; so we proposed to help ETC train 1,000 engineers for free. On the other hand, we think it is our responsibility to offer more Ethiopians an opportunity to acquire the telecom knowledge.
The second reason is about localization. In our Ethiopian representative office, there are now 150 Chinese employees and 200 local employees, who are mainly engaged in after-sales project and technical maintenance. Due to the quick manpower expansion, we, together with ZTE University and ZTE’s after-sales system, developed a local staff skill improvement project and designed some courses. We hope that their skills could improve significantly after a year.
Thirdly, we made a general training plan for ETC, including professional product trainings, and at the same time, we developed management-related training programs for ETC’s high-level executives. For example, we brought 30-40 senior managers to China and gave them the opportunity to communicate with China Telecom, China Unicom and China Mobile on a deep level, including practicing in their equipment rooms and construction sites. These senior managers were very satisfied with our arrangement and overwhelmed by the development of China’s telecom industry. We will continue to carry out training programs targeting ETC’s high-level management.
Fourthly, in terms of cooperation partners, we will increase the number of local project outsourcing team. For example, for the construction of towers, we are signing a framework agreement with the local construction companies. In addition, we have cooperation with local companies on optical cable project and equipment installation. During the cooperation process, their abilities will be greatly enhanced.
In a nutshell, we will do our best to provide skills transfer and training for our client and the society, and supply as many technical experts as possible to the Ethiopian telecom industry.
Merging into the Local Society and Contributing to the Economic Development of Ethiopia
The profits of an enterprise come from its contribution to the local society. While expanding its overseas markets, ZTE follows the philosophy of merging into and serving the local society, and tries to make contributions to the economic development of the country while providing localized service.
When asked about what changes the project had brought to Ethiopia, Zhang proudly said that not only had the Ethiopian project brought profound changes to the local telecom services, but more importantly, the project had pushed forward Ethiopian economic development.
Firstly, in terms of telecom services, Ethiopia had one million mobile users in 2007, which is 1.3% of the entire population of 77 million; 700, 000 to 800, 000 fixed-line users including 20,000 to 30,000 digital users. By 2009, with the completion of our second phase project, mobile users have reached four million, four times increase over 2007. Meanwhile, we also feel that there is a great demand for fixed-line broadband and we are speeding up the construction of the second phase MAN and international gateway exchanges. We believe that the digital users will grow explosively in the time to come.
The third phase GSM network, upon completion, will cover 64% of the nation, and accommodate 10 million lines. The fixed-line capacity will reach 2.4 million lines, in which there are one million phone users and over 600,000 data users. The CDMA network will have a capacity of 2.4 million lines, covering 90% of the entire nation and providing telecom service to more rural users as 60% to 70% of the Ethiopian population is scattered in the rural areas. The CDMA network is therefore very important for Ethiopia. In terms of fiber cable deployment, the total length of optical cable has reached over 60 million kilometers, which is quite significant in Africa.
In addition to the significance for the telecom services, Zhang believes that the project also increases Ethiopia’s economic performance and greatly pulls the local economy. Taking ETC as an example, ETC received revenue of over US$200 million between June 2007 and June 2008; and it reported revenue of over US$400 and a net profit of 160 million between June 2008 and March 2009. Its revenue doubled within just nine months. With the expanding coverage of the telecom network, the information exchange will be quicker and smoother, including agriculture and hand-made product information exchange in the market. This will potentially promote the Ethiopian economy.
Especially for the Ethiopian people, their understanding and development of hi-tech enterprises has been deeply influenced by our project. The local government is preparing to set up a hi-tech park and sincerely welcome ZTE to take part in its development. With the initial efforts from ZTE, we have great confidence in the development of more and more IT and telecom-related industries and companies in Ethiopia.
At the end, Zhang said confidently that we are willing to contribute our wisdom and strength to Ethiopia’s development, and we believe in the great future of Ethiopia.