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Three events signal crisis for the CCP; BT faces political risks with China licenses

SinoInsight 1
On Jan. 21, several mainland media reported that United Kingdom operator Three had signed a 5G agreement with Huawei worth £2 billion (about $2.64 billion). According to a report by Sina, Three UK and three other UK telecommunications companies, EE, O2, and Vodafone, had “also cooperated with Huawei with Li Ka-shing’s assistance.”

On Jan. 25, China’s Ministry of Industry and Information Technology awarded UK’s BT Group “value-added licenses” on the mainland. The licenses will allow BT to directly service and bill customers in China.

Li Ka-shing, Hong Kong’s richest man, is a senior advisor and former chairman of CK Hutchison Holdings. Hutchison owns Three UK, and was blocked from buying O2 by the European Union in 2016. O2 was part of BT Group from 1985 to 2002.

OUR TAKE
1. The Chinese Communist Party has expansionist ambitions, and the exporting of advanced telecommunications technology like 5G is a crucial part of the Party’s plans. Based on our understanding of CCP behavior, it cannot be ruled out that the regime’s 5G push abroad does not involve “creative” arrangements, such as tapping “middlemen” to acquire overseas telecommunications companies or other “backdoor” or informal agreements and arrangements.

2. The CCP’s 5G push comes amid a political crisis in the regime (see entry below), a new “cold war” between the Chinese regime and the United States (see our 2019 special report), and increased scrutiny of Chinese telecommunications makers like Huawei and ZTE. We believe that foreign companies face very high levels of political risk if they opt to work with Chinese telecom producers or China.

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