Political Risk in the Telecommunications Industry – Is Political Risk Back? |

Political Risk in the Telecommunications Industry - Is Political Risk Back?


Political risk for telecommunications providers has traditionally translated into regulatory risk, and mainly in form of issues surrounding network licensing, national radio spectrums and to a certain point trade barrier issues. Most of these issues impacted principally the network operators and less directly the equipment and service providers. Moreover, due to a worldwide and sustained surge of privatization and deregulation, the industry became widely regarded as the pinnacle for globalization, or indeed according to some its enabler through the "communications revolution". Consequently, the industry has not been particularly focused towards political risk to any significant extent for quite some time, in particular in comparison to other industries such as banking and resources. However, trends over the past few years suggest that political risk may be back. First, as a result of the increasing emphasis on emerging markets as the source of growth, following the saturation of the mature markets, and more recently over the past two years or so, due to political risk stemming from national security and human rights issues.

The political risk from national security initiatives refers to the increasing trend of governments across the world launching measures to monitor, intercept and control, in some cases even limit, communications, motivated by national security and political reasons. The trend is particularly significant in such major markets as India China and Russia. In this regard the first 8 months of 2010 have been particularly demonstrative, with the impact measured in hundreds of millions Euros for the European and North American providers for the company I am working for alone. Significantly, however, this is not only a challenge to Western corporations, as the Chinese provider Huawei has discovered through its experiences in the United States, Australia, Europe and in particular in India.

Secondly, this trend represents a considerable dilemma from the point of view of Corporate Social Responsibility and human rights in particular. Currently, telecommunications suppliers are expected by international norms to provide monitoring and interception capabilities as part of network solutions by default, yet may become held responsible for the misuse of these capabilities by governments that violate human rights of their citizens. The sale of monitoring equipment to Iran by Nokia Siemens Networks is a case in point in this regard. The current expectation to screen customers based on their intent, or the probability of the customer to misuse the capabilities towards violating human rights, is also particularly challenging and probably not a sustainable approach.

Utilising these real-life cases I will seek to postulate how political risk is likely to develop for the industry in the near future and how a leading company in the industry is seeking to monitor, analyse and manage these emerging risks.

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Christian Fjäder, Head, Risk Management and Resilience

Monday, 27 September 2010
5.15 p.m. - 6.30 p.m.

Seminar Room 3-1
Level 3, Manasseh Meyer
Lee Kuan Yew School of Public Policy
469C Bukit Timah Road
Singapore 259772

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