MTN and Vodacom show interest in investment in Ethio Telecom

MTN and Vodacom show interest in investment in Ethio Telecom

South African operators Vodacom – partly owned by Vodafone – and MTN have jumped in quickly to express interest in Ethiopia’s plans to open up Ethio Telecom to foreign investment.

Both operators have wide interests across Africa, with the exception of Ethiopia, which has kept a government-owned monopoly in telecoms.

The government announced this week that it would seek foreign investment in a number of state monopolies – not just telecoms but including air transport and power.

MTN welcomed the move: “Ethiopia presents many exciting telecommunication opportunities and we look forward to further discussions with that nation’s authorities on potential partnerships and opportunities,” said the company.

Vodacom gave a similar response: “Vodacom has said on many occasions that Ethiopia is an attractive market so it follows that there would be interest. Naturally this is dependent on what might become available and if it fits within our investment parameters.”

It will be the latest attempt to bring foreign management expertise into Ethio Telecom. In December 2010 the company signed a management contract with Orange. But the initial deal was for only two years and was not renewed at the end of 2012.

The new decision to seek foreign investment comes only weeks after a new prime minister, Abiy Ahmed, promised reform. Already he has ended a six-month state of emergency – which was due to last another two months – and decided to negotiate a peace treaty with neighbouring Eritrea.

Ethio Telecom took its first steps to liberalise the telecoms market in May, when it announced that eight independent companies could be virtual internet service providers, all of which would use the incumbent’s infrastructure. Internet penetration in Ethiopia is low, at 16 million users in a population of 100 million.

The ruling party, the Ethiopian People’s Revolutionary Democratic Front (EPRDF), said this week that some industries would be transferred to the private sector partially or fully, listing railway services, sugar plants, industrial parks, hotels and manufacturing enterprises, but the party said the government will retain controlling stake in Ethio-Telecom, Ethiopian Airlines, hydropower plants and maritime transport enterprises, and transfer the rest to domestic and foreign investors.

The EPRDF attributed lack of foreign exchange and high debt – at 59% of GDP – among the reasons for the decision to seek investment. The party added that state-owned monopolies needed corporate reforms.

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