Orange wants a stake in Ethio Telecom

Orange has formally declared its interest in buying into Ethio Telecom, almost three months after it declined to participate in the sale of new telecoms licences in the country.

The announcement came from Henok Teferra Shawl, Ethiopia’s Ambassador to France, Spain, Portugal, the Holy See and Monaco. In a Twitter post, Teferra shared that he had held “fruitful discussions” with a team from Orange, “which has formally submitted interest to participate in the partial privatisation of @ethiotelecom.”

Just to quickly recap on the situation in Ethiopia, the government sold one new operating licence in May to a consortium headed by Safaricom, thereby breaking Ethio Telecom’s monopoly. There were two bidders in the process and supposedly two licences up for grabs, but the group led by MTN and backed by China’s Silk Road submitted a significantly lower offer and the state exercised its right to issue just one new licence.

Orange had been widely tipped as a bidder; indeed, executives at the company had for months been fielding questions about whether the telco group would take part in the licensing process and had repeatedly indicated that it might. But when push came to shove, it did not apply.

The stumbling block for Orange could well have been mobile money. The new licensee is specifically excluded from offering mobile financial services, the state having elected to allow Ethio Telecom a monopoly in that segment of the market for another year or so. Ethio Telecom recently launched its Telebirr mobile money services and as of last week had signed up 6 million customers, according to the local press.

When Orange failed to bid for an operating licence, there was talk of it looking at buying into Ethio Telecom instead. Indeed, Reuters at the time quoted Brook Taye, a senior advisor at Ethiopia’s finance ministry, as speculating that the likes of Orange and Etisalat – another expected bidder – were more interested in buying into the incumbent than picking up licences of their own.

It seems there was more to that statement than simple face-saving.

The government formally launched the process for the sale of a 40% stake in Ethio Telecom last month, giving interested parties until mid-July to respond to its Expressions of Interest (EOI) document. A Request for Proposal (RFP) will come next, but as yet there’s no fixed timeline for that. There has been no official statement from the government on which companies responded to its EOI, nor has Orange commented.

It stands to reason that big companies will at least look at the Ethio Telecom sale though.

As Ambassador Teferra pointed out on Twitter, Ethiopia is “very attractive to foreign investors,” at least from the point of view of having a fast-growing economy and a sizeable population. Teferra noted that there are more than 100 million people in the country, but did not mention that mobile penetration is around or below 50%.

Even with one new licensee already confirmed and a potential second to be issued at an unspecified future date, buying into the national incumbent – and therefore into that growth potential – remains a tempting prospect.