Ethiopia Grants Operating Licence to Kenya’s Safaricom and Others

Ethiopia has granted an operating licence to a consortium of firms — including Kenya’s Safaricom, Vodafone and Vodacom. The consortium bid $850 million for the licence, according to senior finance ministry adviser Brook Taye. This move will potentially end the state’s monopoly over its stunted telecoms sector.

The shake-up of the potentially lucrative sector, currently dominated by state-owned Ethio Telecom, is a cornerstone of Prime Minister Abiy Ahmed’s economic reform agenda. The prime minister hailed the news, saying the consortium’s bid “offered the highest licensing fee and an excellent investment case.” He said the consortium would bring the most significant infusion of foreign direct investment in Ethiopia to date and that “our desire to take Ethiopia fully digital is on track.”

Abiy’s government planned to award two new telecom licences. Still, in late April, it announced it had received only two bids after some firms that initially expressed interest opted not to submit. This was including France’s Orange and the UAE’s Etisalat.

The Ethiopian government expects new telecoms licenses to bring an infusion of cash, jobs and infrastructure investment. The consortium is set to create up to 1.5 million new jobs and bring $8.5 billion in investment over ten years, Brook said. He further added that it would provide 4G and 5G internet services, and by 2023, the Ethiopian government will launch a low-orbit satellite to provide nationwide 4G coverage. 

Ethiopia is currently mired in a six-month-old conflict in its northern Tigray region, and tensions are running high with Sudan and Egypt over disputed border territory and Ethiopia’s massive dam on the Blue Nile River.

These factors might have discouraged some firms from bidding for a license, said Chiti Mbizule, an analyst at Fitch Solutions. “Although operators tend to take a more long-term view of the markets they are looking to enter, for the more risk-averse players, it can’t be ruled out that the political and economic outlook could play some role in their decision to hold off entering the market at this stage,” Mbizule said. Some companies might have also been put off by a central bank directive that had prevented foreign-owned firms from providing mobile financial services.

 

 

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