Africa Forges Ahead With Telecom Privatization

Opportunities abound for investors in Africa.

The biggest pan-African operators of mobile services, such as MTN, Orange and Vodacom, are keen to invest in the privatization of Ethio Telecom in Ethiopia, which is leaning on the World Bank for expertise to complete the transaction. It isn’t not the only state-owned fruit that seems ripe for picking.

Privatization programs for telecom assets are also planned for Togocom and Benin Telecom in West Africa. In Zimbabwe, the cash-strapped government is desperate to unload loss-making state-owned telecoms. According to the Zimbabwe Auditor General, state-owned internet services provider Powertel incurred a $3 million loss before taxes in 2017, and its current liabilities exceed its assets by $6.4 million. Another government-controlled telecom firm, TelOne, which offers fixed phone and broadband services, cut its operating loss by 42%, to $7 million, that same year. Fraud and embezzlement have contributed to serious losses. The administration, eager to cut government expenditures, has already initiated the privatization process.

Ethio Telecom’s path may guide Zimbabwe and other reform-minded African countries that are promoting privatization of national assets. Arthur Goldstuck, managing director of World Wide Worx, an independent technology research and strategy company, says investment activity in Africa’s telecom industry will be driven by companies seeking to merge or acquire established local organizations that “urgently need to evolve from legacy models” and can benefit from support to expand and develop.

“The biggest impediments are the regulatory restrictions. [Africa telecom investments] require extensive negotiations and deal-making before an actual deal takes place,” Goldstuck says. “Black empowerment laws in South Africa may also be an impediment.”

Meanwhile, private-sector telecom activity is hot on the continent, too. India’s Bharti Airtel is preparing an initial public offering of its entire Africa portfolio. Several telecom companies are bidding for Luxembourg-based Millicom’s African assets, and industry consolidation is expected in Kenya and Tunisia. South Africa will also undertake LTE spectrum bidding this year, which is expected to be followed by investment from service providers.