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Ethiopia will issue two telecom licences to foreign companies

Ethiopia will issue two telecom licences to foreign companies

Image from Kenyan Wallstreet

After a senior official announced on Friday the government's plan to open the world's last major closed telecom market, Ethiopia will issue two two telecom licences to multinational mobile companies.

The government will also offer a minority stake in Ethio Telecom, the monopoly operator, and foreign firms will be invited to bid.

"We have announced the market structure as 'two plus one'," State Minister of Finance Eyob Tekalign Tolina said by telephone, referring to the two new licences and a 49 percent stake in Ethio Telecom, the monopoly operator.

Ethiopia's telecoms industry is considered the big prize in a push to liberalise 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.

Abiy took office last year and announced a raft of major economic and political reforms. Of all the pledged steps to open up the economy to private investment, Abiy's government is moving the fastest on the telecoms sector. Officials said that this is because the government believes that the sector will spur growth in other parts of the economy.

Ethiopia is also one of the final frontiers globally for multinational telecoms companies. They have been eagerly awaiting the government's announcement on the market structure since parliament passed a bill last month outlining the scope of a regulator for the sector.

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.

The government had decided to issue two new licenses in part because preparing Ethio Telecom for a partial sale is proving a lengthy process. Like most state-owned enterprises, the company is struggling with debt.

Partially privatising the state-owned operator and allowing two foreign operators to enter the market to compete with the incumbent will improve network quality and speed, the finance ministry said in a statement released on Friday. Improved digital infrastructure will also enable job creation for Ethiopia’s youth, the statement read.

Other countries on the continent such as Uganda and Ghana have more than five telecoms operators, which analysts said ultimately hurts the consumer as network quality falls over time.

The government hoped to open bidding in September.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.

Ethiopia’s population is youthful and growing rapidly. The economy has averaged near-double digit growth annually for more than a decade. Just a third of Ethiopians have mobile phones, according to a 2018 World Bank study. 

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