Between Safaricom, MTN & A Race For Ethiopia’s Telecoms Market
As of late last year, there were lots of expectations from Ethiopia. Chief of those is a result of the country’s plan to open up its telecoms sector, one of the last few closed of such in the world.
Over the first course of 2021, there’s been a series of notable developments.
The much sought-after Ethiopian telecoms license has finally been awarded. A consortium led by Kenya’s Safaricom. Japan’s Sumitomo, and Vodafone won the bid with USD 850 Mn.
MTN, Africa’s largest mobile carrier, offered only USD 600 Mn for the license, and lost the auction. The telco, nevertheless is looking to rebid in the second phase of the license auction.
Probably, the company might have to bid higher to since other international players are still jostling for a pie of the telecoms market in Africa’s second most populous country.
Safaricom, East Africa’s most valuable enterprise, does seem like the ideal pick for an operator in Ethiopia.
Not only is the telco quite familiar with the East African mobile markets, but also sits on one of Africa’s most successful telecoms narratives.
Well, that has much to do with M-PESA, which is sometimes ascribed to as the cradle of mobile money in the continent. With USD 10 Bn worth of market share value, the firm is the tenth most valuable in Africa.
However, Safaricom might to have the avenue to replicate its M-PESA crack code in Ethiopia detail for detail. It is a ready market, but Ethio Telecom, the state-owned company that has been presiding over mobile and internet connection in the country, has gone ahead.
Ethio Telecom has already launched what is Ethiopia’s first mobile money service. In a country of more than 114 million people (second to Nigeria’s over 200 million), more than 1 million people signed up for the mobile wallet in one week.
Called Telebirr, the mobile money service will be integrated with traditional banks in the following weeks.
Does that mean Ethio Telecom will control Ethiopia’s mobile money sector? The state-owned telco has pledged to allow entrant telcos to operate in the space after they start activities in the country, but they are currently barred by the law to do so.
Unless rival telcos innovate around existing hurdles, it could be hard to eat some market share off Telebirr.
MTN isn’t yet part of Ethiopia’s telecoms reform, but it hopes to grab a license to take part of the mobile money that will happen in the East African nation. With Safaricom already in front, it can take much doing before MTN catches up with the movement.
“We were particularly focused on the lack of mobile money in the licence regime, and there were some issues around how the teleco constructs would be accommodated within Ethiopia. We certainly priced for those things and near-term risks that we saw, and we felt that the financial bid there was appropriate,” MTN chief executive Ralph Mupita said.
The banking system in Ethiopia is grossly inefficient, as it’s a place where only 19 banks serve a population that’s more than thrice that of Canada. With the new mobile money platform, the government aims to attract 21 million users in the first year of Telebirr’s operations.
In 5 years (2026), the service hopes to have nothing less than 33 million users.
According to Prime Minister Abiy, by launching Telebirr, the government forfeited USD 500 Mn worth of offers from two bidders to roll out mobile money services in the nation.