Ethiopia telecoms bids disappoint, MTN backed by China

By Morris Kiruga
Posted on Tuesday, 27 April 2021 15:43

ethio telecom
A branch of state-owned Ethio Telecom is seen in Addis Ababa, Ethiopia. REUTERS/Maggie Fick

Ethiopia intends to liberalise its telecoms sector by awarding two new licenses, and selling off a minority stake (40%) in the state-owned monopoly Ethio Telecom.

On Monday 26 April, Addis Ababa confirmed receipt of two bids for new telecoms licenses, bringing it closer to ending the monopoly of the sector.

The two bids came from MTN of South Africa – the continent’s largest telecoms company – and a consortium that includes Kenya’s Safaricom, its minority owners Vodafone and Vodacom, CDC Group and Japanese general trading giant Sumitomo Corp.

While there are only two bids for two licenses, Ethiopia could award both, either, or none. Of interest to observers though, is the fact that there were such few bids. About 12 multinational companies had expressed interest in the new licenses, once hailed as ‘the deal of the century’ but most did not submit bids by the 26 April deadline.

‘This is not a tender’

“Two licenses, two bidders. This is not a tender,” says one frustrated potential investor in the Financial Times. Other potential bidders might be seeking the 40% stake in Ethio Telecoms; choosing to play it safe by not making an investment from scratch, seeing as that approach could be laden with extensive limitations.

The new licenses, for example, are only for telecoms services, and new entrants must use existing tower networks. Foreign investors will also be locked out of the country’s potentially lucrative mobile money market.

In April 2020, Ethiopia’s central bank published new rules for the mobile money market which bar foreign owners. This means that while Ethio Telecom can operate mobile money services, MTN and the Vodafone consortium cannot.

The telecoms market is still mouth-watering for investors: the country of more than 115 million people only has 38.5% mobile penetration and 20.6% internet penetration. 

Other concerns such as the war in Tigray and political stability issues, including an election later this year, might have led to the lack of more bids.

Bottom line

Should they both win, the two bids submitted might also offer insight into the US-China trade war, particularly on telecoms equipment.

While announcing its bid, MTN Group confirmed that it had partnered with the Silk Road Fund, an investment fund owned by the Chinese government under the One Belt, One Road initiative. “Other partners will be disclosed on a successful bid outcome,” the multinational said in its 26 April announcement.

The Safaricom-led bid is, on the other hand, directly backed by the UK and US governments through their respective investment funds. The US International Development Finance Corporation (DFC) announced last December that it would give “an up to $500 million loan” to the consortium.

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