FORUM: China funds Kiwi telco

Sarah Putt looks at Chinese investment in telecommunications following the signing of the Free Trade Agreement

When New Zealand signed the Free Trade Agreement with China, our exports to that country rose 143 percent in a year. So what is China getting in return?

China has shown a strong interest in investing in New Zealand — in our companies (Haier’s investment in Fisher and Paykel), in our land (the long running Crafar Farms saga) and, it appears, in our telecommunications infrastructure.

Huawei is the most prominent example. It has provided 2degrees with $100 million of debt-funding to roll out extensions to its mobile network. It also runs Vodafone’s fixed line network and it is hoping to become preferred supplier for the Ultra Fast Broadband initiative.

Other than the debt-funding for the 2degrees network, Huawei is no different to any other global technology company that operates this country such as Ericsson (from Sweden), Alcatel-Lucent (France) and Nokia Siemens (Finland). Although it did appear to get an endorsement by the Prime Minister, which I’m not sure the other technology companies have ever received.

Now there is the news that Axin has secured money from private Chinese investors to build a second trans-Tasman cable. Axin is establishing a solid track record in New Zealand with the building of the Taitokerau network in Northland. TUANZ CEO Paul Brislen, who attended the launch, told Computerworld that Lee spoke about the similarities between Chinese and Maori culture and said that they were “in it for a generation”.

Brislen says China has done “due diligence” on New Zealand. “It bodes well that they will invest further in New Zealand.”

Axin chair Robin Lee says the company has a management contract with Kordia that would see the state-owned enterprise put its own traffic (which includes ISP Orcon) on the network. But when I asked Kordia’s CEO about this, he emailed back a vague statement saying Kordia was in discussions with many parties including Axin.

Axin is also the Australian agent for China Communications Service (which is 51 percent owned by China Telecom), but Lee tells me that CCS is not part of the trans-Tasman deal. I mention it because that is a very powerful relationship. China Telecom is the state-owned telco, it has 192 million fixed line telephone subscribers, 62.36 million mobile subscribers and 61.75 million broadband subscribers.

I asked New Zealand trade commissioner Pat English if China was pushing to invest in infrastructure here and effectively saying ‘if we can’t invest, then you can’t sell your goods in our country’.

“No, I really don’t think it is. The Chinese are very interested in investing in New Zealand, and they are investing in New Zealand. I think the Crafar Farms is something that needs to be put to one side because it was about... there’s more than enough in the media about why that wasn’t going to go through.”

English has facilitated two ministerial ICT trade missions to mainland China and both of them had a distinct telecommunications flavour.

He mentioned Pacific Fibre, whose CEO Mark Rushworth was on the most recent mission, as being of interest to Chinese investors. When I phoned Rushworth to find out if he’d had any success he told me he was looking for investors in a number of regions – Asia, Middle East, the US and Australia and wasn’t prepared to be specific at this time.

Chinese investment in telco appears to be about money and expertise. Both Huawei and Axin are demonstrating that they have a deep understanding of the New Zealand political and social landscape. They have understood the emerging role that iwi is playing in telco, which says to me that they are very sophisticated players and they are here for the long haul.

I’ve spoken to a number of business people who have visited China recently and they all speak of being overwhelmed by the sheer size and scale of the companies there.

But, just as Chinese investors are taking the time to understand our culture for their benefit, so too must we make the effort to understand theirs. What we lack in scale, we have to make up for in smarts.

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