June 12, 2019 / 1:35 PM / 4 months ago

Exclusive: Ethiopia plans to issue telco licenses by year-end

ADDIS ABABA (Reuters) - Ethiopia is aiming to award telco licenses to multinational mobile companies by the end of the year, ending a state monopoly and opening up one of the world’s last major closed telecoms markets, three people with direct knowledge of the process said.

FILE PHOTO: A branch of state-owned Ethio Telecom is seen in Addis Ababa, Ethiopia July 26, 2018. REUTERS/Maggie Fick/File Photo

Ethiopia’s telecoms industry is considered the big prize in a push to liberalize the country’s economy launched last year by Prime Minister Abiy Ahmed because of its huge protected market serving a population of around 100 million.

Government officials have already looked at several potential options, including the sale of a minority stake in Ethio Telecom, granting of new licenses to multiple telecoms operators or a combination of both.

Abiy is keen to deliver quickly on his reform pledges but preparing Ethio Telecom, the monopoly operator, for a partial sale is proving a lengthy process, said the sources, who asked not to be named. As a result, the authorities are opting to auction new licenses first.

The plan, which has not yet been formally announced, would open the bidding process for two licenses in September and they would be awarded in December.

The government will expect the winning companies to start operations next year, initially using Ethio Telecom’s infrastructure to run their networks, the sources said.

State Minister of Finance Eyob Tekalign Tolina told Reuters the government hoped to launch a bidding process in September, but he declined to give further details of the reform plan.

“By this time next year, we hope that many Ethiopians will be using different SIM cards,” he said. “We are operating on a very aggressive timeline.”

Vodafone, South African operator MTN, France’s Orange and Etisalat of the United Arab Emirates are likely to be among the leading contenders vying for entry into the Ethiopian market.

Senior executives from those companies attended a telecoms conference in Addis Ababa this week and met with government officials.

Ethiopia’s potential as an untapped market could outweigh concerns about any risks, including Ethiopians’ low income levels and the country’s over-valued birr currency.

“There will be a bidding war. It’s the last greenfield site. There’s an opportunity to be market dominant,” said one company executive.

A new telecoms regulator will issue the licenses, but this institution has not yet been set up. A law to create the new watchdog - the Ethiopian Communications Regulatory Authority - is scheduled to be debated by parliament on Thursday.

TOO OPTIMISTIC?

Company executives who met with government officials this week were told to expect an announcement on the liberalization plan, possibly next week.

New licenses are the preferred option of telecoms executives, rather than a potential sale of part of Ethio Telecom.

But several executives expressed scepticism over the government’s ability to deliver new licenses by the end of this year.

One company official said opening a bidding round in September was ambitious given the complexities of the process and the number of issues that still needed tackling.

“We need a credible, robust, unambiguous roadmap for the next two years,” said another executive. He said Ethiopia must clarify details of the sector’s future structure before company boards could consider a possible investment.

Even if the government opts for new licenses over a partial sale of Ethio Telecom, information on the state-owned company’s existing infrastructure and balance sheet will be crucial for assessing the licenses’ value.

Chinese companies Huawei and ZTE and Sweden’s Ericsson have been involved in developing infrastructure for Ethio Telecom over the past few years.

Executives said they were more hopeful than at any point in the past decade that the government was serious about reforming the sector.

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“It feels real this time, for the first time,” one of them said.

State finance minister Eyob said the reforms were on track and that, having consulted advisers from regulators including the U.S. Federal Communications Commission, the authorities were ready to move forward.

“We’ve reviewed global experiences, the best and worst. We are a late comer in this so we can learn from what others did wrong and right,” he said.

Editing by Joe Bavier and Jane Merriman

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