Elephant in the room: Over-pampered Huawei sues NCA, rejects local partnership

Chinese tech giant Huawei, which has for more than a decade, controlled an overwhelming majority of technology support services for both state and private institutions in Ghana, has dared to sue the National Communications Authority (NCA) for introducing a new license that allows local and smaller players into that space.

This is what a country like Ghana gets when it chooses to cede such a critical sector to a company from a country where no African business organization can ever dream of holding such a huge share of such a critical sector, much less sue a regulator for pursuing a national interest policy.

Huawei’s control of the technology support services space in Ghana cuts across all major digital public infrastructure. In fact, Huawei’s dominance of that space is so big that they even outsource jobs to local entities and pay them peanuts, while they keep the big bucks.

The NCA, under the auspices of the Ministry of Communications and Digitalization, has therefore tweaked the existing Electronic Communications Managed Services License (ECMSL) to allow local and smaller entities, other than the original equipment manufacturers (OEMs) like Huawei and Ericsson, to take over part of the work. But Huawei, the leading OEM in the country is vehemently opposed to the new license, to the extent that it has sued NCA, praying the Electronic Communications Tribunal to stop NCA from implementing the license as is.

The New License

The new license, dubbed the Electronic Communications Managed Service License (ECMSL), assigned levels one and two managed services to non-OEMs, while level three support services will remain with the OEMs – mainly Huawei and Ericsson.

Levels 1 and 2 support services, which is under Category One in Table 1 above, include running the Network Operation Center (NOC), Call Center Fibre managed services, Field Level maintenance (radio and transmission), as well as Tower sites and other related services.

This then limits Huawei and Ericsson to Level 3 support services under Category Two – importation of equipment on behalf of the telcos and other industry players, installation of same, and maintenance and upgrade of Hardware and Software releases.

In their appeal to the tribunal, Huawei is seeking three specific reliefs:

1. An order setting aside the decision of the Respondent (NCA)…which sought to disqualify the Appellant (Huawei) from applying to participate in Category 1 ECSML.
2. A declaration that Huawei is qualified to apply to be licensed to perform any or all of the scope of services listed under the both Category 1 and 2 of the ECMSL
3. An order against the NCA to accept the application of Huawei for provision of the full scope of services listed under both Categories 1 and 2, for the grant of license either under the current ECMSL regime or under the previous dealership license.

The reasons the cited for seeking those reliefs have already been captured in a previous article by this writer.

Without prejudice to the honourable tribunal, this is Huawei practically telling the government and people of Ghana to sacrifice public interest in favour of Huawei’s parochial interest.

Some concerned industry experts consider Huawei’s move as one of an over-pampered operator, who has been allowed to control a huge part of a critical sector in Ghana, often riding on the backs of local entities to make millions of dollars for so many years. That seems to have gotten into their heads and therefore they have the nerve to challenge a whole country for pursuing a national interest policy.

When the license was first introduced to industry players, Huawei and Ericsson presented separate written protests. Huawei in particular, included a subtle threat to seek compensation if the license is implemented. That is how entitled Huawei has become, after Ghana allowed them to control an overwhelmingly huge chunk of the country’s critical digital public infrastructure.

Refusal of local partnership offer

This writer also learnt that, contrary to the terms of the new license, Huawei was even given the opportunity to consider partnering local entities to deliver on some of the support services under Category 1, but Huawei flatly rejected that offer and insisted that it is against their company policy to partner local players in any country they operate in.

The irony of Huawei’s claim is that, they outsource jobs to local entities and pay them peanuts, but they can’t partner local entities on equal terms. Moreover, while they hold on so dearly to their company policy, they question why a whole country should also insist on a national interest policy. Huawei’s posture suggests that the status quo serves their parochial interest well, so they expect the whole of Ghana to sidestep national interest in favour of Huawei.

Initially, when the NCA introduced this new license, it did so without consulting the affected industry players, something which this writer pointed out among other thing in a previous article.

But subsequent to the article above, NCA has engaged all industry players in an extensive stakeholder consultation, and made it clear that the license will be implemented as is because it is in the national interest.

Like Huawei, Ericsson also did register some concerns about the scope of the license, but still committed to paying for the new license, while the NCA considers expanding the scope of the Category Two license to include Levels 1 and 2 support services.

But Huawei, which already controls an overwhelmingly huge chunk of the telecoms managed services subsector in Ghana, and has made loads of money from the country over the years, has elected to go legalistic instead.

Huawei NOC hosted outside Ghana

Meanwhile, industry players have informed Techfocus24 that Huawei Ghana’s Network Operations Centre (NOC) is located in Nigeria, something that experts think is not out of the norm, but is worrying because it means data belonging to Ghanaians are being hosted outside of the country, which is not ideal. This new license will ensure that NOCs for technology support services are hosted locally.

Fixing the imbalance across board  

The bigger picture about this whole thing is that, the industry regulator is currently grappling with a significant market power (SMP) in the telecoms industry, called MTN, which is a South Africa company and has gained an almost uncontrollable dominance in Ghana’s telecoms market, creating a grave market imbalance that regulators are practically scratching their heads to manage. Take note that the telecom industry itself is dominated by foreign entities. Out of the three operators, two (MTN and Telecel) are in the hands of foreign entities, and even the one owned by Ghana government (AT Ghana) has recently secured a foreign investor.

Meanwhile, telecoms tower co-location in Ghana has also created a de facto SMP called ATC Ghana (American Towers Corporation – Ghana), another foreign entity, which controls an overwhelming majority of co-location telecom towers in Ghana. At the last count, ATC Ghana had over 80% of co-location towers and about 60% of all towers in the country. That is a grave imbalance yet to be fixed.

Again, Huawei has for many years been a dominant player in support/managed services sector controlling software importation, installation and management for the greater majority of industry stakeholders, including telcos, ISPs, private data centre owners and even the state.

This is what the NCA is seeking to cure, by allowing the OEMs – Huawei and Ericsson – to keep importing and installing industry equipment and software, and allow the day to day management of same to be done by non-OEMS, particularly local players, unless there is something major where the OEMs are needed to intervene. This is what Huawei is opposed to, because they still want to remain dominant in that space in Ghana.

Huawei against the World

It bears mentioning that across the globe, Huawei is facing grave challenges due to suspicions about its operations compromising the national security of the countries it operates in. Huawei has suffered huge losses in the US, Europe and in parts of Asia in that regard. Notwithstanding the suspicions around Huawei, Africa (including Ghana) has been very kind to Huawei and allowed them to control a huge chunk of technology hardware and software on the continent. But the anti-public interest posturing like the one Huawei is trying to pull off in Ghana only deepens the suspicions around its operations.

The very fact that Huawei is vehemently opposed to the idea of having local partners in the delivery of technology support services, rings alarm bells on what Huawei could possibly be hiding. Indeed, several industry experts hold the view that the new license should have had a local content clause that limits the Category One license strictly to only local companies, or companies with majority local ownership. But as things stand now, Huawei can even partner a local entity or a non-OEM and still apply for the Category One license on the basis of their argument that some of the equipment they manage for telcos are not necessarily manufactured by them. But Huawei has rejected the partnership idea.

Huawei’s Fear

What is apparent is that, a successful rollout of the new ECMSL in Ghana promises to open the floodgates for similar policies to be rolled out across Africa. That seems to scare Huawei out of their pants, because they have similar controls across Africa and they would want do everything to ensure that the status quo is maintained, so that they can keep making their millions of dollars from the continent, while maintaining significant control of critical technology and data on the continent for whatever purpose.

But no policy is cast in stone. Every country, including China, where Huawei comes from, amends their national policies from time to time to meet present and future needs. I don’t think it is right for Huawei to expect that the ECMSL would remain the way it was forever. Change is here and it is for entities like Huawei to embrace the change rather than fighting it and seeking their selfish interest against that of a whole country from which it has benefitted immensely over the years.

In South Korea, there is a national policy that ensures that, on paper, majority shares in every business in any of their critical sectors are held by locals, even if the foreign entity brings in more money than the local partner. That is why in that country, almost all the big global brands have South Korean brands attached to them. But in Africa, we have allowed companies to come into our countries and takeover very critical sectors and they keep shipping profits outside of the continent in droves. They even outsource portions of their work to locals and play bosses. When we tweak policies like the NCA has done, these companies, like Huawei have the nerve to sue and demand rights they never had until we gave it to them.

Companies like Huawei must be told that their parochial interest cannot override Ghana’s national interest. It is that simple. Whatever technical challenges will emerge from a takeover of the level 1 and 2 support services by non-OEMs can be fixed over time. Fixing such challenges is not rocket science. This is not the first time and definitely won’t be the last time the industry will face such transitional challenges.

At this point, I would like to make four quick suggestions regarding the new license:

1. Telcos in this country have always professed that they are committed to supporting government in their bid to build and grow local industries. This is a big opportunity for them to give government the full support to create local businesses in the telecoms support services sector. The telcos will be expected to practicalize their claims and support a national interest policy against a parochial interest.
2. Like both Huawei and Ericsson proposed in their initial responses to the NCA, there is a need for the NCA to allow the players enough time for the transition to minimize the short-to-medium-term network challenges.
3. It is my considered view that the new ECMSL should have been strictly a local content policy and not open to all non-OEMs, including even foreign entities. As things stand now, the main non-OEMs in the industry are all companies owned by foreigners. Reime Ghana Limited and i-Engineering Ghana Ltd are both Indian by origin, and Netis Ghana is Lebanese or so. I believe NCA needs to take a second look at it and ensure that local content is deliberately promoted, otherwise, it would look like this whole policy is merely an anti-OEM policy and not designed to promote local content.
4. If NCA still wants to go ahead with non-OEMs instead of strictly local companies, it must at least insist that majority shares in the companies to be licensed are held by locals. Some have proposed 80/20 local-foreign shareholding structure, with 95% of workers being locals. Whatever the structure maybe, that option is still better than opening it to all non-OEMs.

Meanwhile, there is no injunction on applications of the new license, so any local entity interested in getting into the telecoms support services space can freely apply for the Category 1 license, keeping in mind that it takes skilled labour, a lot of funds and plenty moving around to get the job done.

We leave it here!

Source: Techfocus24