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Ethiopia rewards Safaricom-led consortium with telco licence

By Jeune Afrique
Posted on Tuesday, 25 May 2021 12:24

Ethiopia’s Prime Minister Abiy Ahmed on 22 May in Addis Ababa. DR / Ethiopian Prime Minister's Office

Ethiopia has awarded a telecoms licence to a consortium led by Kenya's Safaricom. The shake-up of Ethiopia’s lucrative telecoms sector, which is currently controlled by state-owned Ethio Telecom, is a cornerstone of prime minister Abiy Ahmed's reform agenda.

This move will end the Ethiopian government’s monopoly over its telecoms sector, which is one of the last in the world to be shut down.

The consortium, which also includes Britain’s Vodafone and South Africa’s Vodacom, offered to pay $850m for the licence, according to Brook Taye, an adviser to the finance ministry.

Safaricom, Vodafone and Vodacom

Ethiopia’s prime minister Abiy Ahmed, who will run for re-election next month in elections that have already been postponed twice, welcomed the news on Twitter on 22 May, saying that the proposal “offered the highest license fee and a very solid investment case.”

He also wrote that the consortium will bring the largest ever foreign direct investment to Ethiopia. “We are on track to make Ethiopia fully digital,” he added.

The government was planning to award two new licences. But by the end of April it had received only two bids after several groups that had initially expressed interest withdrew, including France’s Orange and the UAE’s Etisalat.

The second candidate, South Africa’s MTN in consortium with Chinese investors, offered to pay $600m, which was “not enough” and therefore “rejected”, said Taye.

Balcha Reba, director-general of the Ethiopian Communications Authority, said the second licence would be proposed again soon.

An $8.5m investment

According to Chiti Mbizule, an analyst at Fitch Solutions, the crises facing Ethiopia – such as the war in Tigray as well as the tensions with Sudan and Egypt – may have discouraged candidates from submitting bids. “It is entirely possible that, for the more cautious players, the economic and political situation plays a role in their decision to wait,” he said.

Some may also have been put off by the ban on foreign companies offering mobile financial services. Meanwhile, Ethio Telecom has just launched its own mobile money programme called Telebirr.

Taye has stated that 1.5 million jobs are expected to be created and $8.5m invested over 10 years through the Safaricom licence, which will provide 4G and 5G internet coverage. He also added that a low-earth orbit satellite will be put in place by 2023 that will provide nationwide 4G coverage.

Proposed reforms within the telecoms sector also include selling a stake in Ethio Telecom, which will help make it more efficient.

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