Ethiopia’s telecom sector now open for interested companies,will Ethio Telecom survive competition?

Government accepting applications. Prime Minister Abiy Ahmed’s government sees potential job creation opportunity for Ethiopia in a privatized telecom sector. Selected two companies will be issued with a license which is worth billions of dollars 

Ethiopia _ Telecom
Ethio-Telecom. Photo credit : SM

May 21, 2020

Ethiopia’s communication Authority is now inviting applications from companies (apparently including expatriate ones) that are interested in taking part in the country’s telecom sector.  

The authority was created as part of Prime Minister Abiy Ahmed’s economic reform measure “to lead the sector in an organized manner.”

According to a report by state media, Ethiopian News Agency (ENA), interested applicants could submit their applications starting May 21, 2020.

Ethiopian Communication Authority Director, Balcha Reba, said that preparations have been finalized to issue two Telecom licenses for companies, as reported by ENA.

ENA cited him as saying that part of the preparation was to hire an international corporate finance consultant and come up with reliable legal regulatory guidelines.

The regulatory draft is said to have about twelve guidelines. The authority is engaging stakeholders to get feedback on the draft, based on a report from ENA.

Procedures of license issues, protections of rights of consumers, and service qualities are among issues included in the regulatory guidelines.

For now, Ethiopia is ready only for two more companies that could offer service in the telecom sector, and the authority has released a document inviting a letter of interest from interested companies.

The next step after application will be the bidding process. The Director of the authority said that a transparent bidding process is arranged.

State Minister in the Ministry of Finance, Eyob Tekalign (Ph.D.), said that the government has been taking different measures to make arrangements for two companies to enter the Ethiopian Telecom market.

Mr. Eyob said “so far companies that have an interest in the telecom sector did not have any conversation with the government.”  It is something that “the government has been undertaking cautiously.”

In November 2019, Bloomberg reported that Safaricom and Vodacom are bidding for the telecom license in Ethiopia. The license is said to be about $1 billion.

It means that Ethiopia could raise about 2 billion dollars if the two licenses are sold.  For critical economists, the policy is a short-sighted one that is doomed to fail the country. 

Notable economists like Kebour Gena have been criticizing prime minister Abiy Ahmed’s administration move to nationalize national assets.

Some also see it from a security point of view, and they argue that it could make the country vulnerable in a region that is affected by security issues.

Ethiopian government tends to see job creation opportunities in the privatization of the telecom industry. It also sees it as relevant to its plan to the development of the digital economy in the country, based on Mr. Eyob’s remark.

Currently, the sector is dominated by state-owned Ethio-Telecom, one of the major revenue earners for the country.In 2019, it reported over US $1.27 billion revenue. It remains to be seen if Ethio Telecom will survive competitions from giant companies like Safaricom and Vodafone. 

It is unclear as to why Prime Minister Abiy Ahmed’s government chooses to get the privatization done in a time of Coronavirus pandemic in the country.

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