A License After, Ethiopia’s Promising Telecoms Liberalization Is Still Problematic
The last time we unfolded the Ethiopian telecoms narrative, the East African nation’s only existing mobile operator, Ethio Telecom, had reported that its revenue streams grew by 31.4 percent in the 12 months ending June of 2020. At the time, the telco was experiencing an increased entry of customers while expanding its network base.
This time, the story is quite different. State-owned Ethio Telecom has fallen 13.6 percent short of its revenue target for the first half of the current Ethiopian fiscal year. The company’s revenue, for the half which ended in the six months to December 31, 2021, increased by only 6.7 percent to USD 562.27 M (about 28 B Ethiopian Birr).
Obviously, Ethio Telecom did make more revenues in the said year, but not just as much as the company projected or hoped. The reason? Major parts of the operator’s mobile network have been disrupted by the seemingly unending conflicts engulfing the northern parts of Ethiopia.
The country’s Prime Minister, Abiy Ahmed, deployed military forces to quell the social conundrum triggered by rebellious Tigrayan forces. But, after a series of disturbing events, intense dissension broke out in two neighboring Ethiopian states up north, a cataclysm that stretched through the second half of 2021.
As stated by Ethio Telecom’s CEO, Frehiwot Tamiru, almost 3,500 of the group’s base transmission stations suffered collateral damages during the crisis up north. The destruction put out the carrier’s services in the sub-region, reportedly costing the company about USD 73 B (3.67 B in Ethiopian Birr) in revenue. Meanwhile, several of the telco’s physical outlets were shuttered during the uprising.
Last month, Ethio Telecom revealed that it had dropped its plans to put up the license for a second sale into the Ethiopian telecoms industry.
In 2020, the country’s government, in an effort to privatize the telecoms sector and kickstart its economic liberalization, said it would sell a significant portion of its stake in the company to interested buyers. Among many offers coming through the door—one of which came from South Africa’s MTN in a USD 600-650 M form—Ethiopia has accepted only one so far.
Safaricom, which is not only Kenya’s biggest telco but also East Africa’s most valuable company, won a licensing bid last year with USD 850 M. The company came as a consortium that included strategic partners, including Vodacom, Japan’s Sumimoto, and CDC Group—a United Kingdom-based development finance institution. Safaricom is the biggest operator in neighboring Kenya pretty much because of the wild success with M-PESA, often called the world’s leading mobile money initiative.
Though Safaricom is already in on the underserved market’s telecoms action, there is reason to think that the replication of M-PESA in the country is unlikely to happen.
Why? Last year, Ethio Telecom launched its own mobile money service, Telebirr, bringing competition to the country’s banks for literally the first time in Ethiopian history. As of now, Safaricom is the state-owned telco’s competition, but mostly in the mobile subscription segment.
In September 2021 (after selling Safaricom a license) the Ethiopian government invited more proposals to claim 40 percent of Ethio Telecom’s remaining, available shareholding. Though no deadline was set for requests from interested investors, France’s Orange indicated intentions to bid. Interestingly, Orange once worked with Ethio Telecom on the basis of a management contract.
As the story goes, the Ethiopian leadership abruptly called off the offer, supposedly because potential bidders requested for the process to be stalled until a more convenient time in the future. However, the Ethiopian Communications Authority (ECA), the body saddled with IT-related activities in the nation, did not name the other companies interested in running for the bid.
Concurrently, the Safaricom-led consortium, referred to as Safaricom Ethiopia, is set to launch a prefabricated, commercial data center later this quarter, as it is already deploying the initiative in Addis Ababa, Ethiopia’s capital city. Safaricom owns 55.7 percent of the special purpose acquisition company, Vodacom holds 6.2 percent, Sumimoto sits on 27.2 percent, and CDC Group has 10.9 percent.
Safaricom Ethiopia looks to, directly and indirectly, generate a total of 1.5 million jobs over the next decade, with estimates that the business will balance its books in the fourth year of operations. According to the group, these ambitions will need up to USD 2 B in capital investment to achieve in the next half a decade.
Despite Ethiopia being “in the middle of a telecoms liberalization”, Ethio Telecom is practically still calling the shots, virtually in all segments.
Case in point, for internet connectivity, the company has 4G network infrastructure already in place. Though the connection served only in the metropolitan Addis Ababa when it was commercially launched, it now covered 136 more urban centers across the country. 4G expanded in partnership with Huawei, Ethio intends to pilot 5G in the country this year.
In the same way, subscribers to Telebirr, Ethio’s mobile money service, grew to over 13 million at the close of the fiscal year’s first half. For context, there are 60 million mobile phone customers in Ethiopia. So far, the total value of transactions on Telebirr is equivalent to USD 103 M (5.1 B Ethiopian Birr).
Featured Image: NitroCDN