Ethiopia has another stab at attracting foreign telcos to licence sale

The Ethiopian government has formally relaunched the process for awarding a new telecoms licence in the country and it’s clear that it still hopes to draw in major international telecoms operators.

The Ethiopian Communications Authority (ECA) on Friday opened what it calls the Request for Qualifications (RFQ) for a nationwide telecoms licence that it has already once failed to sell. Essentially, it is asking interested parties to throw their hats into the ring and, despite the fact that it previously attracted just one bidder for the licence, at a price level that did not satisfy, the regulator is still pitching the process at big telco groups.

Specifically, the ECA said it “invites world-class telecommunications operators to come forward and take part in this exciting opportunity to operate within Ethiopia’s rapidly growing economy.”

It has not published the details of the RFQ, but operators can request a copy. They have until the close of play on 15 September to file their responses.

Should they choose to do so, that is. While there is doubtless still plenty of interest in the nascent Ethiopian telecoms market, operators could easily be put off by how the licensing process played out last time. Not to mention the fact that the market is no longer as untapped as it once was.

Many international telecoms companies were linked with the liberalisation of the Ethiopian market, but when the deadline arrived for bids for the two available private licences in April 2021 just two groups submitted binding offers.

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. There was plenty of speculation over the reasons for the state’s rejection of the second bid, including talk that the presence of Chinese investors could have been an issue, but it could have simply come down to price.

Either way, the world’s major telecoms players were surely watching, and the first licensing attempt, now more than two year ago, will likely have an impact on the way this second go round plays out.

Furthermore, Safaricom launched commercial services in Ethiopia in October last year and has been growing its business there at a reasonable lick; it had rolled out 1,272 mobile sites covering 24% of the population by the end of March, and had signed up a total of 3 million customers, putting its three-month active base at 2.14 million. Meanwhile, incumbent Ethio Telecom had 70 million customers at end-2022, Reuters reported earlier this year, including more than 27 million users of its mobile financial services operation Telebirr. The market still has potential, but the newcomer will face a lot of competition.

Nonetheless, the state is keen to put a positive spin on the situation.

“There are several positive developments occurring in the Ethiopian telecommunications sector since the beginning of the liberalization process including a strong telecommunications sector legal and regulatory framework, a legal framework to provide Mobile Financial Services, and availability of additional spectrum,” the ECA said as it presented the RFQ.

Indeed, newcomers were barred from the financial services space at the time of the previous licensing process, which reportedly put off some would-be bidders, but that has now changed.

However, the fact that the competition for the licence is running alongside the part-privatisation of Ethio Telecom is nothing new. The government invited expressions of interest in a 40% stake in the incumbent last autumn, having previously put the scheme on hold largely due to the broader macro-economic climate. And it is still talking about the interest the process is garnering, without apparently nearing resolution.

In recent weeks, the Ministry of Finance has taken to social media to talk about meetings with international telcos apparently interested in investing in Ethiopia, including Veon and e&. There are no guarantees that their interest in the country will translate into anything concrete, but the government is surely hoping that the outcome of both sales will be different this time around.

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