ZTE Remains on 5G Shortlist in Australia

On May 14, the Chief Financial Officer of Australian telecommunications company, Telstra, asserted to reporters that the company had no intention of removing ZTE Corporation from a shortlist of five companies currently being reviewed for a tender to build Australia’s 5G network.  Telstra’s affirmation of support for the Chinese telecommunications company to remain in the bidding comes despite last month’s ban on ZTE components in the United States by the Department of Commerce over the company’s illicit sales in Iran and North Korea and lying about the terms of a settlement which included a $1.2 billion fine by the U.S.

In addition to crippling U.S. trade restrictions, recent allegations were also unveiled by Australia’s Fairfax Media that highlight the company’s history of institutionalized corruption.  There has been speculation that this activity could become a point of focus for future penalty by the U.S. government, although that will be influenced by the priorities of political leaders. 

The Fairfax Media investigation alleges that ZTE maintained a special department for making systematic bribery payments that it used to obtain two mobile network contracts in the West African country of Benin between 2005 and 2006.  According to internal documents uncovered, ZTE paid up to $12.8 million in 39 payments to 29 officials in the Benin government, including former president, Mathieu Kerekou.  The bribes were approved internally by multiple ZTE officials including senior executives based at its Shenzhen headquarters.

The recent revelations concerning ZTE’s corrupt activities have fueled a debate in Australian media about how and whether the Turnbull government (which has undertaken efforts to roll back Chinese influence in Australia economy) will choose to act in the wake of Telstra’s outward support for ZTE as a contender for this strategic 5G project. In 2017, the Australian parliament passed legislation that outlined a national security framework for the country’s telecommunications and critical infrastructure industry (dubbed the “anti-Huawei” bill) through which the government holds a “consultative” roll with key industry players on the security implications of business dealings. 

It remains to be seen how Canberra responds to the inclusion of both ZTE — and Huawei — as key contenders for a major critical infrastructure project.  In January 2018, at the recommendation of the Australian Secret Intelligence Services, the government blocked Huawei’s construction of a fiber optic cable linking Sydney to the Solomon Islands. Allegations surfaced in the previous year that Huawei had bribed the Solomon Island Social Credit Party with $6.5 million to obtain the contract.