The Ethiopian government recently awarded a telecoms licence to a consortium led by Safaricom.
A second round of licensing, aimed at opening up the country’s telecoms sector to competition, is expected to take place in the coming months, according to Brook Taye, an adviser to the ministry of finance and one of the main architects behind liberalisation of the sector.
An insufficient bid
“We are currently making the final adjustments to a new call for tender. The call for expressions of interest will be relaunched for an additional licence. If MTN wants to participate again and make a more complete offer, there is a good chance that they will be selected,” says the consultant who has been working on the project since 2018.
We contacted the operator, led by Ralph Mupita, but he did not wish to respond to our requests for comment prior to the publication of this article.
MTN, which has about 280 million customers, was unsuccessful in the first round of licensing, as the Ethiopian authorities felt that its financial offer of €600m and technical contribution was insufficient for a country that is struggling to reach even 20% internet penetration.
An attractive consortium
As a result, the Ethiopian government decided to award the licence to a consortium made up of the Japanese investment company Sumitomo, the British fund CDC, accompanied by the US development fund DFC and led by operators Vodafone, Vodacom and Safaricom.
The Safaricom-led entity offered to pay $850m for the licence and committed to investing $8bn over 10 years. It has also taken out a $500m loan that will guarantee payment of charges to the government in the first few months of its launch.
“The consortium, which is expected to be operational by early 2022, will be able to launch its services directly in 4G by 2023 and then in 5G. Sumitomo, CDC and DFC’s offer has an interesting development aspect and a very broad vision on how best to develop certain sectors such as agriculture, industry, education and health, which is important to Ethiopia,” says Taye, in regards to the Safaricom-led consortium.
Privatisation
MTN, which teamed up with the Chinese development fund Silk Road for this bid, will therefore have to revise its offer to provide a long-term vision to Ethiopians.
As for Orange, Etisalat and Zain – three players who had initially expressed interest in obtaining a licence – it would seem that they are preparing to compete for a 45% stake in Ethio Telecom, the national company, which is currently a monopoly in the market, according to Taye.
In any case, it is expected that the process of partially privatising MTN will take place before the second licence is awarded, thereby guaranteeing Ethio Telecom a substantial valuation and a chance to compete with the sector giants.
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