US raises suspicions of Chinese influence in Eastern Europe

The US Department of State has raised concerns over Chinese presence in Eastern Europe as a potential danger for corruption and government espionage ambitions.

During a briefing ahead of Secretary of State Mike Pompeo’s trip to Budapest, Bratislava, Warsaw, Brussels and Reykjavik, two administrative officials fielded questions over the objectives of the roadshow. Russia and China featured heavily throughout the briefing, though Eastern Europe has been highlighted as a potential source of problems for the US.

“The short answer is yes, we are more concerned about the Chinese presence, the Huawei presence in Central and Eastern Europe than in Western Europe,” a senior official said in a briefing. “I should be clear that, of course, we see this as being problematic across the board, but I think what sets Central and Eastern Europe apart is you have a large number of mostly small and midsize states that – many of whom have a higher propensity to corruption.

“And so I think from a Chinese perspective, they see in Central and Eastern Europe EU member-states – I think 12 out of the 16 members of 16+1 are EU memberships or EU member-states. So they see relatively small countries with a recent history of communism with significant pathways of corruption that lend themselves more readily to state penetration in key sectors, and then they have a springboard to operate within EU fora.

“And all you need to do is look at the success that the Chinese have had importing individual Eastern European member-states of the EU to block the EU on things like recognition of the human rights problem in China or a support for the US position in the South China Sea.”

While these accusations are more broad than simply the telecommunications industry, Eastern Europe has been a field of success for Huawei and ZTE in recent years. With perhaps more lax rules and less paranoid governments than the more ‘developed’ nations across the bloc in years gone, recent events will certainly not make for pleasant reading.

Aside from the suspicion this trip has been seemingly designed to turn the Eastern European nations against China, an arrested Huawei employee in Poland appears to have turned the country against China. After several informal conversations about the saga, there does seem to be a general feeling Poland is marching towards an official ban in line with the US.

The Poland issue is somewhat of an interesting one as the government would have to weigh up the benefits of keeping its US ally happy alongside the societal benefits of being Huawei-friendly. Poland is effectively the Eastern European HQ of Huawei, with the firm employing roughly 900 people across the country. A ban would rid of the country of these jobs, as well as any notable investment and also the in-direct employment Huawei’s presence stimulates in other businesses.

The US wants to remain the leading economic superpower of the world, and this aggression against Chinese international expansion seems to be one of the strategies to maintain this position. It isn’t necessarily doing much to hide these tactics or ambitions, but that doesn’t seem to matter; they are working.

Europe gives thumbs up to Telenor simplification sales

The European Commission has given its blessing for Telenor to offload assets in Eastern Europe to Dutch financial and investment group PPF.

The Telenor business units in Hungary, Bulgaria, Montenegro, Serbia will now transfer into the PPF portfolio, for a cool €2.8 billion after the bureaucrats concluded there are direct risks to competition. The initial concern had focused around the existing PPF portfolio, which features O2 Czech Republic and Bulgarian broadcast company Nova Broadcasting Group, though little or no cross-over was found.

“The Commission found that the proposed transaction would raise no competition concerns,” the Commission said in a statement. “First, it would not give rise to horizontal overlaps, as the companies’ activities are confined to the different territories in which they hold their respective telecommunication licenses.”

Another area of concern was the wholesale international roaming and wholesale mobile and fixed call termination services and the downstream markets, though the Commission stated this would be ‘unproblematic’.

The new will be welcomed by Telenor, which has been looking to simplify its business operations, consolidating spend in its Nordic and Asian businesses. The headline of this strategy is focused around restructuring and a reduction of OPEX, though offloading non-core assets is generally a theme which goes hand-in-hand with such initiatives. Discontinued operations over the last couple of months have included Telenor India, Hungary, Montenegro & Serbia and Bulgaria, Telenor Common Operation, Telenor Microfinance Bank and Telenor Banka.

Looking at the last financial results, total revenues declined by 1%, though subscription numbers in the core markets are heading in the right direction. In Norway, and across Scandinavia on the whole, numbers were solid if not glorious, though Malaysia, Pakistan and Bangladesh all grew subscriber bases. Over the course of the quarter, two million subscriptions were added to the ranks, taking the total up to 172 million.

Telenor pulls out of Central and Eastern Europe

Norwegian telecoms group Telenor has called it a day in Central and Eastern Europe by selling out to private equity firm PPF Group for €2.8 billion.

The transaction includes Telenor’s wholly-owned mobile operations in Hungary, Bulgaria, Montenegro and Serbia and the technology service provider Telenor Common Operation. The stuff its flogging contributed 9% of Telenor Group revenues and 8% of EBITDA. It employs 3,500 people and has nine million customers.

“Telenor Group’s strategy is based on growth, efficiency and simplification,” said Sigve Brekke, CEO of Telenor Group. “With the sale of our CEE assets, we take an important step in simplifying and focusing Telenor’s portfolio on the regions where we see the strongest potential for value creation.

“Following this transaction, Telenor’s footprint will consist of integrated fixed and mobile operations in Scandinavia, and strong mobile positions in Asia. Telenor is confident that PPF Group’s experience in both the region and sector will make it a good owner of the CEE assets.”

“Our proposed use of proceeds balances our aim to deliver attractive shareholder remuneration, while preserving strategic flexibility,” said Jørgen C. Arentz Rostrup, CFO of Telenor Group.  “The special dividend will come on top of an all-time-high ordinary dividend and the recently executed buyback programme. We are currently focusing on developing our existing assets and driving digital transformation. In the coming years, we believe there will be value accretive opportunities within our core business areas and geographies.”

“With this purchase, PPF Group is expanding its telecommunications portfolio to four more countries, and fulfilling our long-held goal to become a mid-sized European operator and to use our experience to strengthen our market position,” said Ladislav Bartoníček, PPF Group’s shareholder responsible for telecommunications assets within PPF.

Telenor announced back in January that is was thinking of pulling out of Central and Eastern Europe and it apparently took it a couple of months to hammer out the details of the deal. Telenor has been trying to consolidate its operations back to its core geographical areas after a few foreign misadventures and this looks like a major step in that direction.