Ethiopia has relaunched its plans to award a new telecoms operating licence and to sell off a stake in Ethio Telecom, and is doubtless hopeful of attracting significant foreign investment to the market.

Mary Lennighan

November 17, 2022

3 Min Read
Silhouette, telecommunication towers with TV antennas, satellite dish in sunset

Ethiopia has relaunched its plans to award a new telecoms operating licence and to sell off a stake in Ethio Telecom, and is doubtless hopeful of attracting significant foreign investment to the market.

But while the country’s telecoms market still offers a relatively untapped opportunity for investors, the events surrounding previous attempts to award licences and offload shares might well give would-be market entrants pause for thought.

And the more time that passes, the less attractive the opportunity becomes. Ethiopia’s first private player, Safaricom Ethiopia, launched services last month in competition with the incumbent, which has itself experienced pretty solid growth of late. To really sell the idea of a greenfield market, the government will need to move quickly.

It is attempting to do just that. Regulatory body the Ethiopian Communications Authority (ECA) has given interested parties and potential bidders for the new operating licence until 16 December to respond to a consultation on the licensing process. Any comments submitted will help shape the next steps in the licensing process, it said.

That suggests it’s not simply a case of relaunching the licence sale in exactly the same fashion as it did last year, which makes sense, given that it failed to allocate the second licence, despite having a credible bidder lined up, while it mothballed a second attempt at the back end of 2021.

As a reminder, the initial licensing process attracted significant interest from international players, but while many examined the opportunity, ultimately only two groups submitted binding bids.

The Safaricom-led consortium – which also included Sumitomo Corp of Japan, UK development finance institution British International Investment (BII), then known as CDC Group, and Vodafone, via its stakes in Vodacom and Safaricom itself – won the first licence with a US$850 million bid. But the second, a consortium headed by South Africa’s MTN and backed by China’s Silk Road Fund and other unnamed private equity outfits, tabled a $600 million offer that failed to meet the government’s expectations and the licence went unawarded.

Naturally, there were rumours over the reasons for this, including talk that the presence of Chinese investors could have been an issue, but equally, it could have simply come down to price.

MTN made it pretty clear at the time that it believed its $600 million bid was fair, but whether it has changed its mind since then will inform any decision to have another crack at the second licence. It could well be a case of once bitten, twice shy for the telco group. And others watching the sale closely – and there were doubtless many – might also be wary of the reasons for the failure of that second licence award.

That said, Safaricom’s rapid growth rate should be encouraging. The operator on Wednesday revealed that it has registered 1 million customers on its network, with chief executive Anwar Soussa talking up “the enthusiastic uptake of our data, devices, voice and SMS packages.”

It’s a good sign, but any would-be market entrant will want to get services rolled out as fast as possible to avoid playing catch-up in a growing sector.

Similarly, any investor in Ethio Telecom will want to jump aboard pretty quickly too to capitalise on the growth opportunity.

The part-privatisation of the incumbent was put on hold in the spring, due to the macroeconomic climate. Now “after a careful consideration of the market conditions and a very stable outlook of the country,” the government has invited expressions of interest for a 40 percent stake in Ethio Telecom; that stable outlook is doubtless linked to a ceasefire in the conflict in the Tigray region agreed earlier this month. The government has engaged Deloitte Consulting to advise on the transaction.

The official government announcement did not give a timeline for the privatisation process, but according to Reuters, the deadline for expressions on interest will be in just over a month, on 20 December.

Ethiopia is clearly not hanging about.

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About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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