Ethiopia soon decides on telecom liberalization winners

Ethiopia is one 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 liberalisation of the economy.

In 2019, the country launched an “homegrown economic reform” to propel Ethiopia into becoming the “African icon of prosperity” in 2030. In its reform agenda, 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 to be headwinds against economic progress.

Ethiopia, with its 110 million people and a protected economy, 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 2 bids competed for the 2 operating licences 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 licence, showing doubts on 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 shares of Ethio Telecom than buying licences. However, in 2019, Orange’s chief executive Stéphane Richard had showed more interest in the licences than in Ethio Telecom’s capital.

Private telecom operators will need to build cellular towers themselves or lease the ones from the state-owned Ethio Telecom
Private telecom operators will need to build cellular towers themselves or lease the ones from the state-owned Ethio Telecom

The business conditions are in fact rather restrictive and make it a less attractive opportunity than initially thought. For instance, the licence 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’s region of Tigray against Prime Minister Abiy Ahmed since November 2020 adds uncertainty to the investment. In december, the United Nations estimated 1 million people were displaced because of the conflict. And businesses very much prefer stability to deploy large sums of money.

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