Competition about to ramp up in the Ethiopian telecoms sector

After decades of operating as a monopoly in Ethiopia, state-owned Ethio Telecoms will experience more competition now that the government is privatising the sector.

Competition about to ramp up in the Ethiopian telecoms sector
Frehiwot Tamru, CEO of state-owned Ethio Telecom

The Ethiopian government has disclosed that it will launch a tender for a new international telecoms licence in June. According to Balcha Reba, director general of the Ethiopian Communication Authority (ECA), "more details will be released when we approach the launch date".

Recall that last October, Safaricom Ethiopia became the first private telecom operator in the market—it was also the company's first expansion outside of its stronghold, Kenya where to it holds what can also been seen as a monopoly in the telecoms and mobile money industries.

As of March 2023, Safaricom crossed three million subscribers in the country. The telco is currently operating in 25 Ethiopian cities covering 10% of the about 110 million population. According to the company, it has about 847 network sites, 754 permanent employees and there are 5,000 places where one can buy a SIM card, and 28,000 places where one can buy airtime.

However, the telco's core earnings reportedly fell by a fifth in the year to March 31, hit by the cost of starting operations in Ethiopia, it said on Thursday. Regardless, Peter Ndegwa, Safaricom CEO says the company plans to invest $300 million a year into Ethiopia over the next ten years, having already invested $1.2 billion in the country.

Also, earlier this month, Safaricom received a licence from the National Bank of Ethiopia to expand its mobile money offering M-Pesa in Ethiopia, making it the only competitor against the state-owned mobile money provider, telebirr.

"M-Pesa comes with a tested and proven track record of enabling financial inclusion in Africa, provides services to more than 51 million customers across seven countries in Africa with a safe, secure and affordable ways to send and receive money, top-up airtime, make bill payments, get short-term loans and much more," says Anwar Soussa, CEO of Safaricom Ethiopia.

Last year, the Ethiopian government amended its national payment systems proclamation to provide the necessary regulatory framework for foreign owned telecom operators to provide mobile financial services in the country. 

Opening up the Ethiopian telecoms market

Decades after the state-owned Ethio Telecoms operated as a monopoly in the country, the government—in 2019—disclosed it will award two telecom licenses to multinational mobile companies. Due to the monopoly, there was poor connectivity at high costs and low-quality support services.

As part of President Abiy Ahmed's plan to open up the country's economy [and also improve the digital economy] which has been slowed down by civil war in the region. Recently, the government also announced its plan to sell 45% of its telecom Ethio Telecom, a figure up from the 40% sale announced in November 2022.

In 2022, Deloitte—the manager of the sale—stated that Ethio Telecom was worth about $1.5 billion, this means that the government is hoping to raise $675 million from the share sale. If the government had stuck to its initial plan for 40%, it would have been expecting to raise $600 million.

According to the Ethiopian government, the "low teledensity in Ethiopia highlights the huge untapped potential in Ethiopia’s telecommunication sector", and that Ethio Telecom's "robust infrastructure coupled with its strong financial performance will offer a significant competitive advantage to any investor".

Ethiopia is home to over 112 million people, making it the second-largest country in Africa by population. It is one of the last countries in the world to introduce competition in the telecom industry, a rigorous process started by the government in 2019 as part of its Economic Reform Agenda, with the support of the International Finance Corporation. The reforms aim to increase jobs, reduce poverty and grow the local economy in an inclusive and sustainable manner.

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