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WikiLeaks Cable Casts Dim Light on Huawei

Ray Le Maistre
3/3/2011
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WikiLeaks , the online media organization that is drip-feeding leaked U.S. diplomatic cables into the public domain, has published a document, identified as a communication from the U.S. embassy in Kenya, that details reactions to Chinese companies' business practices in Africa, with particular reference to Huawei.

There are a few things to note about this document, entitled "KENYA - DOING BUSINESS THE CHINESE WAY," which is marked as "Sensitive-but-unclassified."

Although it was published by WikiLeaks late on March 1, the document is dated Oct. 30, 2007, so is more than three years old. It also, in a series of "anecdotes," attributes comments to senior executives at African telecom operators, which are probably best treated as hearsay, as there is no absolute proof of their veracity.

That doesn't make them less interesting, though. Some are directly attributable to named individuals, the most notable of which is the series of comments allegedly made by Michael Joseph, the then-CEO (and currently non-executive board member) of Kenya's leading mobile operator Safaricom Ltd. , to U.S. Mission staff on Oct. 18, 2007:

    Echoing the views of many industry contacts, he [Joseph] said the quality of the ICT equipment provided by companies like Huawai and ZTE is pretty good, and their prices are low. But he used a monosyllabic expletive beginning with "S" to describe after-sales service. When there are equipment problems later, he said, the Chinese run for the door, and matters are made worse by the language barrier. Safaricom purchased equipment last year from Huawei, but the deal was too good to be true. Huawei effectively reneged and only delivered half the equipment promised in the contract. Joseph went to China personally, eventually got the Huawai CEO to admit that the company had lied, and then forced it to cancel the contract.


The cable goes on to cite Joseph as saying he was put under pressure by Kenyan government officials to reinstate the contract with Huawei.

It would appear that any doubts harbored by Joseph, who recently stepped down after 10 years as Safaricom CEO, about Huawei's ability to deliver on its promises were soon assuaged. Following the initial transmission of the U.S. diplomatic cable from the embassy in Nairobi in late 2007, and during Joseph's tenure as CEO, Safaricom continued to award deals to the Chinese vendor. In 2010 Huawei was awarded softswitch and convergent billing system deals by the Kenyan operator, while Joseph agreed to a trial of Long Term Evolution (LTE) technology only months ago, reports IT News Africa. (See Safaricom Bills With Huawei and Safaricom Deploys Huawei Softswitch.)

The document published by WikiLeaks also suggests that the country's state-owned operator, Telkom Kenya , awarded Huawei a CDMA contract without issuing a competitive tender, a process that should have been undertaken by law. The then-CEO of Telekom Kenya, Sammy Kirui, is also cited as suggesting that after-sales service from Chinese technology suppliers was poor. He also allegedly noted that ZTE was pressing hard to be an alternative supplier, but that he was insisting "the company's second strategic tech partner must be non-Chinese."

ZTE did, though, land an optical equipment contract awarded by the Kenyan government. (See ZTE Wins in Kenya.)

The cable concludes:

    The views and anecdotes conveyed by people like Joseph and Ndemo [Kenya's Permanent Secretary of Information and Communications] put a bit flesh on the bones of the oft-repeated (but seldom proven) contention that Chinese companies play dirty. Most disturbing in this case is the idea that Chinese influence is so great that it's actually distorting critical investment decisions in Kenya's all-important ICT sector. For further investigation is the role of the Chinese government. We wonder if it simply turns a blind eye to the dirty work of Chinese firms, or if it actively contributes to the problem.


The full cable can be read here.

ZTE declined to comment "on what are effectively unfounded rumors from unproven sources."

Huawei is currently preparing a response. Safaricom has yet to respond to Light Reading requests for comment.

The publication of the document on WikiLeaks comes at a sensitive time for Huawei, which is seeking to build trust and credibility in the U.S. market as well as counter suggestions of anti-competitive trading practices in Europe. (See Huawei's Open Letter to the US, Huawei's Rep Repair, Court Finds for Huawei vs Moto and Sino-Euro War of Words.)

— Ray Le Maistre, International Managing Editor, Light Reading

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hundscheidt
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hundscheidt,
User Rank: Light Beer
12/5/2012 | 5:11:13 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


Nice cable... simply one more account of behaviour we all knew and love of the Chinese vendors. Add to it also: breaking local labour laws. Referring to the many Chinese "tourists" coming in to do the work.


Also shows how they buy business in Africa, something that European companies are not allowed to do; thus losing oil and mining contracts to the Chinese.


Will the US and EU ever learn? Or will it be when all speak Chinese that they realise there was some significant truth behind all the so-called rumours?


I think the latter.

digits
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digits,
User Rank: Light Beer
12/5/2012 | 5:11:12 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


Some persepctive is required, I think.


Recent evidence from our very own telecom sector shows that companies such as Siemens and Alcatel have been involved in bribery and corruption, so to suggest that non-Chinese companies are above engaging in disreputable business practices would be incorrect -- it's likely that they are more practised at the dark arts and are more clever about covering their tracks. To say that European countries are "not allowed" to buy business would be to ignore very recent evidence:


http://www.lightreading.com/document.asp?doc_id=202456


 


And I think if you ask any network operator if they have had companies that failed to deliver to agreed contracts, whether in terms of the product/service, timeframes, costs etc I think you would find a long list of companies from all over the world that couldn't deliver on their agreements, whethr that be because they never could or because circumstances changed.


In this instance it wsa Huawei that was cited. I imagine there will be other such documents where other companies are cited in similar conditions.


I'd be more surprised if we ever see a cable from a US embassy that highlighted concerns about US companies winning deals by using unethical practices....


Generally, though, China obviously sees Africa as a continent where it can exert influence and benefit from its growth. Let's not forget that China is not alone in this -- there are plenty of countries looking (via loans or through national companies) to invest in Africa and ride the expected growth wave. China, though, has been more aggressive and is now well established on that continent, and I believe other countries wish they had done the same and got in there first.


But they didn't.  


 


And here's a question -- there seems to be paranoia about how the whole world might end up speaking Chinese. Much of the world currently speaks English either as a first or second language -- is that a similar concern with regards to cultural imperialism? Or would it be OK for English-speaking culture/countries to dominate the global landscape but not Chinese? There are always two ways to look at these situations...


Please note - I am not an apologist or supporter of any country/regime. I certainly would not seek to support or favor any country that has a poor human rights record (and show me a major world force that doesn't have recent shameful episodes on its books -- and those are only the ones we know about...) or which is totalitarian. I'm just saying that if you look at the world from a holistic point of view, then things don't look quite so black and white...


 

melao2
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melao2,
User Rank: Light Sabre
12/5/2012 | 5:11:11 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


It is somewhat funny to see Europeans and North Americans complaining about the chinese companies doing the same dirty business practices in 3rd world countries, that both Europeans and North American companies always did.


 


Here in Brazil there are countless cases from well known "western companies" that did exactly the same.


 


The shift on the balance of power is really changing.

hundscheidt
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hundscheidt,
User Rank: Light Beer
12/5/2012 | 5:11:11 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


You're right that other companies have had shady practices also. But:


They get penalised when caught (example is Shell for bribing Nigerian officials (I believe it was), while that is the only way to get things done in some countries). Also, they are forced to adhere to labour laws; again penalties if they don't. While chinese companies utilised tourist visa...


What worries me more, is that Chinese companies invest in Africa, but the locals do not benefit that much; roads are build using Chinese labour. All the money stays at the top.


Having said that, in the end the customers (operators and we) are to blame.


 We want cheap.


And all the good rules and ethical behaviour enforcemen goes right out the window to achieve this. A Dutch example here is KPN, who has a Huawei national DWDM backbone build by tourist ;-)


That is how they get in, that is why, even if they lie, they still stay in.


My general comment is that American and European companies are forced to operate within certain rules and with a certain openess (of the books for example). Huawei and others, are not. So when they are caught stealing/lying/bribing etc, there is no penalty.


PS. As for US companies using unethical practice: I remember Echelon being used to listen into certain communications...

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 5:11:10 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


 


Ummm...as you saw the Cisco employees involved got arrested.  The question should be "Did Cisco condone the practice?"  For example, the Huawei employees that were caught bringing things across the Indian border do not directly reflect on the company.  If they were doing things that violated laws and Huawei was unaware then that is not Huawei's problem.


That is the difference.  What investigation showed that Cisco was aware of the illegal practices?  Any? Here is a statement of what were very bad practices clearly carried out by Huawei as part of company policy.


seven


 

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 5:11:10 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


 


melao2,


I think you are missing the point.  The point is that in the same timeframe that Huawei is declaring that it is living by Western Rules, it was found violating those rules.  The difference is that when Western Firms get caught violating those rules, people get fired and companies get fined.  When Huawei gets caught violating rules, there is no issue.  The reason is - there are no rules that Huawei violated.


Does that mean that Huawei is exclusively bad or has an exclusivity on bad?  No - but it does say pretty much put a "liar liar pants on fire" tag on the letter from earlier in the week.


seven

melao2
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melao2,
User Rank: Light Sabre
12/5/2012 | 5:11:10 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


Hi Brook. I would like to know which punishment Cisco systems got from the US Government from the case below.


http://www.lightreading.com/do...


http://www.lightreading.com/do...


http://www.lightreading.com/do...


http://www.lightreading.com/do...


http://www.lightreading.com/do...


http://www.lightreading.com/do...


 


I do not condone the business practice stated in the article. But apparently, as I see, the biggest problem was that the Kenyan governement did not do his part. And as it is, there are no proofs that the Chinese government influenced the Kenyan government. Maybe it was a matetr of bribery from Huawei to the Kenyan government, we will never know.


For example in the Cisco case, the only thing that happen is that the employees were fired. The Brazilian government failed again to bring justice, and the US government did not do anything. Porbably bribery happened also.


That is why I don't see much difference.

melao2
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melao2,
User Rank: Light Sabre
12/5/2012 | 5:11:08 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


The Cisco employees were arrested in Brazil, by the brazilian government who carried out an ivestigation. That is why I see this as a problem with Kenya.


Of course, neither Huawei nor Cisco should have done such things.


As for the Cisco issue, I can't see how the HQ do not know about the process that takes a product from the factory to Brazil. I doubt that people did not know about the fraudulent exports in the HQ.


Cisco fired the employees because the problem was brought to public by the justice.


As for the Huawei thing in Kenya, it is a document from the US embassy that leaked. It is not a investigation carried by the Kenyan govenment which confirmed the fraud.


In all honesty the Cisco case was confirmed, and the Huawei is basically a rumor from Wikileaks.


And again, we will find many many cases that european, american, brazilian, chinese, indian (you name it!) companies did fraudulent busineses in overseas markets and were not punished by the local government.


 

mountainwest
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mountainwest,
User Rank: Light Beer
12/5/2012 | 5:11:07 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


Congradulation, Mr. Ray. You have learned chinese government way to handle this kind of "blame", or the "perspective" 


"What, are you talking about we (china) have human rights problem? look at your newspaper, how many prisioners, how many criminals you have, We ARE better than you! "


 


 


 


 

chengjinzhu
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chengjinzhu,
User Rank: Light Beer
12/5/2012 | 5:10:36 PM
re: WikiLeaks Cable Casts Dim Light on Huawei


In the end who do you trust?  Transparance seem important here for customers to know what is real.

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