Investors Battle It Out In Ethiopian Telecom Privatization

Foreign investors will compete for ownership of Ethiopia's electric company.

The process to privatize Ethiopia’s state-owned telecom operator, Ethio, and issue two new licenses has intensified with the entrance of new international investors. Analysts say interest from abroad is likely to spur further investment activity and financial-technology development in the country.

Sanya Suri, an analyst at the Economist Intelligence Unit, told Global Finance that the opening up of the country’s telecom industry to foreign investors “will pave the way for growth in terms of data penetration in the country and provide a platform for the fintech sector” to grow.

“In terms of the broader significance for the continent as a whole, this activity will drive a series of related/auxiliary industries,” says Suri. “For instance, it will provide handset manufacturers, big technology firms and telecom operators a platform to build a potential mobile money market and overtake traditional banks in the region.”

Other analysts cite MTN, Vodacom and Orange as the major frontrunners for Ethio shares, while Safaricom, the dominant player in Kenya, is also keen to expand into Ethiopia. “However, Chinese companies Huawei and ZTE also have a comparative advantage when bidding for the shares, as they have been the major suppliers of infrastructure for Ethio Telecom,” explains Suri.

Executives at Safaricom believe that licensing requirements for an Ethiopian telecom operator are as high as $1 billion, while a similar amount would be required to set up a network. The country has a population of about 100 million.

“Ethiopia is the last big prize in Africa in terms of telecommunications … and everybody who is a mobile operator in the world will be looking at this opportunity, including ourselves,” Safaricom CEO Michael Joseph told Kenyan Wallstreet in November. “We will definitely be part of it.”

Prime Minister Abiy Ahmed is keen to speedily reform the Ethiopian economy, and the Ethiopian Communications Authority has already chosen KPMG as adviser for the privatization of Ethio. Another advisory firm was due to be announced for the awarding of two new telecom licenses by the end of November. The bidding process for the two new licenses and the privatization of Ethio is expected to be completed in April next year.