Sunday, 11 April 2021

Ethiopia’s new telco licences are not guaranteed

by Harry Baldock, Total Telecom
Thursday 04 March 21

The government is looking for major value from bidders and may pull the plug on the auction if expectations are not met

The liberalisation of Ethiopia’s telecoms market has been much anticipated for almost three years now. As one of the world’s last telecoms monopolies, as well as a country with a huge population, the opportunity for new telcos would be enormous, attracting potential entrants from around the world.  But with only two licences to be made available, the competition is set to be fierce. This is just as well, since the government is expecting a significant payday…

The liberalisation of Ethiopia’s telecoms market has been much anticipated for almost three years now. As one of the world’s last telecoms monopolies, as well as a country with a huge population, the opportunity for new telcos would be enormous, attracting potential entrants from around the world. 

But with only two licences to be made available, the competition is set to be fierce. This is just as well, since the government is expecting a significant payday. According to Eyob Tekalign, the state minister responsible for the privatisation process, three independent teams have calculated the value of the two new licences, with Tekalign suggesting the process will be further delayed if bids are not sufficient.

“If we get the value we expect from the bidding process, we will go ahead,” explained  “If not, we will have another look.”

The process of liberalisation has already seen numerous delays, having initially planned to see the new entrants finalised last year. Nonetheless, interest in this exciting market remains high, with interested parties including a consortium including Kenya’s Safaricom, Vodafone, and Vodacom, named Global Partnership for Ethiopia. Other bidders include Axian, MTN Group, Orange, stc, Etisalat, Liquid Telecom and the Chinese mobile virtual network operator (MVNO) Snail Mobile. Airtel Africa has notably said that they will not be bidding.

But despite the markets undoubted potential, new entrants are not without their own concerns. Back in December, reports suggested that non-Ethiopian companies would be forbidden from offering mobile money services, a potentially huge revenue stream for an incoming telco. Similarly, the government has said that foreign tower companies will also be denied entry to the country.

As a result of these and other measures, Ousmane Dione, World Bank Country Director for Eritrea, Ethiopia, South Sudan and Sudan, wrote in a blog post last month that the government was protecting Ethio Telekom from the harsh realities of market competition. He argued that these policies were detrimental not only to the health of the sector in Ethiopia, but ultimately to Ethio Telecom themselves.

“Ultimately, policies that seek to protect Ethio Telecom’s infrastructure by allowing it to charge high prices for interconnection will end up harming the company. The new operators will be Ethio Telecom’s biggest customers if prices are set fairly, through market competition. Ethio Telecom has the potential to become a regional powerhouse, but only if it is well-prepared for the competitive environment,” he said.

Speaking to reporters, minister Tekalign responded to these criticisms by saying that the government would seek to “provide an equal playing field” for the incoming telcos, though what this pledge specifically relates to is unclear. 

He did confirm, however, that the government had no intention of allowing foreign infrastructure companies to enter the country. This news will be a major relief for Ethio Telecom, who will benefit from the new entrants being forced to lease towers from them.

“We shouldn’t have infrastructure that we have spent billions on going to waste,” Tekalign said.

The bidding process remains ongoing, with the final bids expected to be finalised later this month.

 

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