Ethiopia has awarded its first telecommunications license for $ 850 million to a consortium including Britain’s Vodafone, which could herald the start of an opening up of Ethiopia’s closed economy.
The consortium, led by Safaricom in Kenya along with Vodafone and Vodacom, also includes UK financial development agency CDC and Sumitomo of Japan. An offer for a second license from MTN South Africa for $ 600 million was rejected as too low and the license will be returned.
The opening of what is the world’s largest telecommunications monopoly in a rapidly growing country of 114 million people was touted by the Ethiopian government as “the deal of the century”.
But potential bidders have been put off by restrictions on offering lucrative mobile money services and by the government’s insistence that new operators build their own infrastructure or lease it from Ethio Telecom, the state monopoly, rather than using third party tour operators.
Some bidders are also wary of the volatile political situation after the Federal Army decided to overthrow the government in the Tigray region last November.
Companies that had expressed an initial interest, including Orange from France and Etisalat from the United Arab Emirates, should take a second look when the license is returned, according to telecommunications analysts.
Since the initial offer closed, the government has relaxed its opposition to mobile money, saying new operators will be able to offer such services within a year, subject to approval by the central bank.
Abiy Ahmed, the Prime Minister, said in a tweet on Saturday that the consortium led by Safaricom represented the largest foreign direct investment in the country’s history. Ethiopia has experienced near double-digit growth for much of the past 20 years based on an Asian-inspired state development model that prevented foreign capital from controlling “the dominant heights” of the economy like banks and telecommunications.
Abiy said the new consortium will invest more than $ 8 billion in building a network over the next decade.
Brook Taye, a senior finance ministry adviser and a member of the team overseeing the privatization, said the successful consortium also pledged to launch a low-earth orbit satellite to cover the entire country from here. 2023. The new investment would create between $ 1.1 million and $ 1.5 million. m jobs, he said.
A person familiar with the bidding process said the investment and employment figures were fanciful, driven by a desire to present good news ahead of national elections slated for next month. “There is no way on earth that you will make any money if you invest $ 8 billion,” the person said. “I think they’re just pulling numbers out of nothing.”
Safaricom employs around 5,500 people in Kenya, a country with an economy similar in size to Ethiopia’s, at around $ 95 billion, and a population of 52 million, or just under half of the cut.
However, Safaricom’s sustainability report states that its services support the employment of more than one million people through its “wider economic impact,” a figure that takes into account entrepreneurs able to earn a living from the telecoms ecosystem.
Brook said the second license would be fired “very soon”, possibly with further adjustments to the rules to make it more attractive. Potential first-round bidders complained about the rule change, including a lack of clarity on interconnection fees, which were reduced shortly before the bid deadline.
Brook denied that the tender was opaque, saying “it is the most transparent process that has ever taken place in Ethiopia.” He said the sector would be more open “so we think there will be a very successful second offer”.
Ethiopia also plans to sell a 40% stake in Ethio Telecom, which has 46 million subscribers, later this year.