Solomon Islands moving ahead with contentious plan to build Huawei mobile phone towers with $100 million loan from Beijing

Solomon Islands is pushing ahead with a contentious plan to borrow almost $100 million from China to build 161 mobile phone towers across the country with telco giant Huawei, despite an internal report warning the project may not stack up financially.

The Permanent Secretary of the Ministry of Finance and Treasury McKinnie Dentana told reporters in Honiara on Wednesday that the towers would expand and improve mobile coverage across the country.

He also confirmed it would be funded by a concessional loan from China, the first time the government of Solomon Islands has borrowed from one of Beijing’s main overseas lending institutions.

“The project will be fully funded with a concessional loan facility under the EXIM Bank of China of approximately CNY448.9 million ($96 million) at a rate of 1 per cent interest rate for a period of 20 years,” he said.

Mr Denata said the government would roll out the project over the next three years, and wanted to complete almost half of the towers ahead of the Pacific Games, which will be held in Honiara in November next year.

“This will help people in rural areas to enjoy the Games, even if they don’t come to Honiara,” he said.

He also claimed external advisers had told the government they would be able to repay the loan with revenue generated from the towers.

“The independent review of the project shows the project would generate sufficient revenue for the government to fully repay both the principal loan amount and the interest cost within the loan period,” he said.

However, the ABC has obtained a copy of what appears to be the same independent report, which was conducted by consulting giant KPMG.

Revenue potential ‘significantly’ overstated

Communications tower
KPMG estimates about $225 million will be needed to cover revenue shortfalls over the next 20 years.(Photo: Gary Rivett, ABC News.)

The report analyses an earlier and slightly more ambitious proposal to build 200 mobile towers, rather than the 161 the government is pushing ahead with.

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