Ethiopia said on Friday, 5 July 2019, that it would award two new telecom licences to multinational mobile companies and invite foreign firms to bid for a 49 percent stake in Ethio Telecom, the state monopoly. It was the government’s first detailed plan for opening one of the world’s last large closed telecom markets. “We have announced the market structure as ‘two plus one’,” State Minister of Finance Eyob Tekalign Tolina told Reuters, in a report carried by South Africa’s IOL.
The finance ministry said the privatization would be done through competitive bidding, Bloomberg reported in a story carried by TechCentral. Ethio Telecom would first be organized into two parts: an infrastructure division managing the international gateway and fiber-optic networks, and a services unit for mobile and retail operations. Bloomberg said the licences and the stake sale were planned for the first quarter of 2020. Eyob had told Reuters in June that the government hoped to open bidding in September, and sources told the agency that winners would be expected to start operating in 2020, at first using Ethio Telecom’s infrastructure.
At a press briefing, Eyob said Ethio Telecom would remain one company with two wings, so a foreign buyer of the 49 percent stake would benefit from both, New Business Ethiopia reported. He said the sector needed about $2.2 billion of investment. “If we take for instance 4G is limited to Addis Ababa at the moment… Telecom is key to build digital economy… overall impact is enormous… that is why we prioritized telecom privatization and liberalization of the sector,” he said. Asked why only two new operators would be let into a market of more than 100 million people, he said global experience pointed toward mergers and a small number of operators. He said the World Bank was advising the ministry, that he expected 50 to 60 expressions of interest, and that Ethiopia had 40 million mobile subscribers. Ethiopians could buy shares once the companies were listed on a future stock market, he said.
Vodafone, South Africa’s MTN, France’s Orange and Etisalat of the United Arab Emirates were seen as likely contenders, according to Reuters. Orange deputy chief executive Ramon Fernandez said the French company was considering a bid for a stake in Ethio Telecom but was also open to competing for a licence, Bloomberg reported. Reuters noted that Myanmar used the same structure when it opened its market in 2013 and received more than 20 bids for two licences.
“They got the balance right,” said Andrew Kitson, a telecom analyst at Fitch Solutions in London. “They have decided that two new players plus a state-owned incumbent is sufficient to create a level playing field, a competitive market.” Analysts pointed to Uganda and Ghana, which have more than five operators, as markets where network quality had suffered over time.
The finance ministry said more competition would bring service to “underserved areas in the country” and that improved digital infrastructure would create jobs for young people. Only about a third of Ethiopians had mobile phones, according to a 2018 World Bank study cited by Reuters. Parliament had passed a law in June creating a telecom regulator, and the ministry also planned to sell at least five sugar factories within six to 12 months, Bloomberg reported.
Sources: IOL (Reuters), New Business Ethiopia, TechCentral (Bloomberg)