Breaking barriers

After Ethiopia, It’s Djibouti Liberalizing Its Telecoms Sector

By  |  July 12, 2021

That Africa is home to some of the last frontier markets in the world is no longer a secret, if at all it once was. Many of this continent’s countries are still in the formative stages economically, but a growing number of them are taking steps to reform, liberalize and of course, expand.

For the better part of the past year and a significant chunk of the present one, Ethiopia has been the poster child for sector-wise reformation in Africa.

The East African nation’s telecoms liberalization, which marked the opening up of one of the world’s last closed telecom markets, is seemingly set to usher in an era of competition and abundance investment opportunities in the nation.

Jumping on the bandwagon, another East African nation is looking to welcome private investors or players into its telecommunications sector. Djibouti, a tiny yet Horn of Africa country, is looking to privatize its state-owned telco Djibouti Telecom.

By selling what Bloomberg reports as a “significant minority stake” in the company, the Djiboutian government would be kickstarting the revamping of government-owned businesses in the country and the modernization of its low-middle-income economy.

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Djibouti Telecom is one of the last state-owned monopolies in Africa, with 2019 World Bank stats putting its number of subscribers at 410,000. Well, there are about 1 million people in the nation, and this telco provides landline, mobile and internet services to almost half of them.

The government is yet to reveal the exact stake amount up for sale, but it’s clear it is looking out for a first-rate strategic partner.

Djibouti might make a fairly easy-to-enter market since there are already 12 high-capacity undersea cables that would help connect the country to not only the East African region, but the rest of the continent and beyond. The nation is also in the middle of implementing its 4G network, while the government says it would leave explorable opportunities in the mobile money and data center sectors.

Djibouti’s domestic infrastructure is far from sufficient. Nevertheless, the country remains one of the best connected when its international fiber cable systems are considered. All this groundwork brought about the Djibouti Internet Exchange, a meeting point for a many cables systems that go underneath between the Red Sea and the Indian Ocean.

Be as that may, the price tag on broadband services in the country is way over the top. This is a major growth drawback for its telecoms market.

Privatizing a portion of Djibouti’s telecom overlord appears much needed, as the nature of the market keeps the penetration are the segment levels substantially low.

Though there is growth in the country’s mobile and internet markets, there is a major lack of competition and foreign imprint in the industry. Djibouti Telecoms may have started things off quietly when it started investing in its mobile network and being a key investor in cable systems such as PEACE, DARE and AWE.

Djiboutian modern telecoms reportedly kicked off in 1999, when Post and Telecoms Office merged with the International Telecom Company to create what is now known as Djibouti Telecom.

In this market, telephones boxes and internet cafes are already under the liberal economy, but the rest of telecoms is solely controlled by this one telco. No surprises why Djibouti Telecom is one of the most valuable companies in the entire country, accounting for 14.5 percent of Djibouti’s GDP and employing 1,260 people.

Djibouti’s East African neighbor, Ethiopia, is further along with telecoms liberalization. In the process of selling a 40 percent stake in the state-owned telco, Ethio Telecom, the Ahmed Abiy-led government has awarded fresh operation licenses to a consortium covering UK’s Vodafone Group and Kenya’s Safaricom. The bid for another license is expected, as vyers like MTN look to have another try.

When Ethio Telecom launched Telebirr, the first mobile money service in the country in May, over 1 million people signed up for the service in its first week of availability. In one month, that figure quadrupled to 4 million, according to a document published by Ethiopia’s finance ministry. This July, no less than 6 million Ethiopians have become active users of Telebirr, Ethiopia’s idea of an M-PESA.

That alone goes to say that not just Ethiopia but Africa at large, is an attractive market for telecom companies. Home to the world’s most youthful and fastest-growing population, there is an abundance of avenues tom build, scale and profit, especially from mobile and internet connections.

According to Oxford Business Group, Djibouti has the highest number of international gateway connections in East Africa, which lends to data provisioning for regional countries such as Ethiopia and Somalia, most of which typically lack data connectivity.

In a country which enjoys stability is a seemingly politically rough and socially unstable regional neighborhood, around 20 percent of its population liver below the poverty line, while 26 percent have no means of livelihood. In the year of the pandemic (2020), Djibouti’s economy shrank by only a percentage point, and the International Monetary Fund (IMF) forecasts a 7 percent growth for it this year.

Another African nation in pursuit of a liberal telecoms sector is Angola, the oil-rich Portuguese colony in the southern region of the continent.

Featured Image: NitroCDN

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