Ethiopia is one of the last business opportunities for telecom operators to conquer a new market. But it isn’t as attractive as expected.
African icon of prosperity in 2030
Ethiopia decided to reduce its monopoly in the telecom industry, for what the government called a “once-in-a-century reform,” as a first step in Ethiopia’s liberalization of the economy.
In 2019, the country launched a “homegrown economic reform” to propel Ethiopia into becoming the “African icon of prosperity” in 2030. In its reform agenda, the Prime Minister’s office mentions that “public sector monopoly in telecom and energy, restrictive regulation for new start-ups, and traditional Industrial Policy may be ill-suited to innovation” and are considered headwinds against economic progress.
With 110 million people and a protected economy, Ethiopia is the last large market opportunity to be invested by private corporations worldwide.
Protective economy and armed conflict
But despite initial interests from several telecom operators, only two bids competed for the two operating licenses opened by Ethiopia. The director general of the Ethiopian Communications Authority mentioned the government had the right to cancel the bidding process and could award only one license, showing doubts about the successful outcome of the bidding.
Ethio Telecom, the state-owned telecom operator, is also subject to private investment but Ethiopia would still own 55% of the company. A senior advisor at the finance ministry told Reuters that Orange and Etisalat, the French and the United Arab Emirates mobile operators were more interested in buying Ethio Telecom shares than buying licenses. However, in 2019, Orange’s chief executive, Stéphane Richard, showed more interest in the licenses than in Ethio Telecom’s capital.
The business conditions are in fact rather restrictive and make it a less attractive opportunity than initially thought. For instance, the license winners would not be allowed to manage mobile financial services. Moreover, they would need to build the infrastructure, such as cell towers, themselves. The other solution will be to lease Ethio Telecom’s infrastructure. But they can’t engage subcontractors.
On top of it, the armed conflict in the Ethiopian region of Tigray against Prime Minister Abiy Ahmed since November 2020 adds uncertainty to the investment. In December, the United Nations estimated one million people were displaced because of the conflict. And businesses very much prefer stability to deploy large sums of money.
Media sources and useful links:
- A Homegrown Economic Reform Agenda: A Pathway to Prosperity, Ethiopia’s Prime Minister Office, 2019, Free access
- Invitation for Submission of Expression of Interest (EOI) for TelecommunicationsService Licenses, Ministry of Finance Ethiopia, May 2020, Free access
