Ethiopia identified as the ‘next big thing’ for African telecoms
The new government of ethiopia, which came into power in April, is poised to liberalise the market, opening up huge growth. Analysis by James Pearce
Ethiopia has been identified as one of the next big opportunities for telecoms operators looking at foreign investment, with the market set to open up in the coming years. The country still has only one operator – state-owned Ethio Telecom, with over 62 million mobile subscriptions. But this is set to change, according to analysts GlobalData.
The Ethiopian government has said it will look to offload around a 30-40% stake in Ethio Telecom, as well as splitting the company in two, with stakes set to be made available to global investors. The move, announced by prime minister Abiy Ahmed in June, is part of a wider programme of economic reforms which will also open up Ethiopian Airlines, Ethiopian Power, and the Maritime Transport and Logistics Corporation to outside investment.
Reports also say the government will look at granting new licences to operators, which could open up the market signific-antly. GlobalData says mobile subscriptions in Ethiopia could rise from 62 million this year to over 100 million in 2023.
This process has already started to some degree. Ethiopia is one of the few African states to still have a state-owned telecoms monopoly, although Ethio Telecom did open up to local partners in May 2018 by allowing some to provide internet services through its infrastructure.
A number of operators have already been linked to a potential move into the country. Vietnamese telco Viettel has enquired about a potential investment into Ethio Telecom, according to reports. "If the Ethiopian government offers the clear and sensitive option for selling of Ethio Telecom’s shares, Viettel will still thoroughly consider this option if it is suitable with Viettel’s investment strategies," a spokesperson for Viettel told Reuters.
Operators with an existing African presence, such as MTN, Safaricom and Orange, have also been linked to moves in Ethiopia. Safaricom is reportedly looking at partnering with Ethio Telecom to launch its M-Pesa payment services in the country. Last year, it acquired a 260m stretch of fibre between Marsabit in Kenya and the border town of Moyale from Mauritius-based Bandwidth and Cloud Services, giving it an infrastructure presence on the Ethiopian border.
"If confirmed, this is an important positive for Safaricom, and would offer an important upside on M-Pesa revenue growth numbers based on the number of subscribers it registers in the 100 million market," Standard Investment Bank said in a research note, as reported by The East African.
"The upside could be higher depending on the negotiated revenue share – but unlikely to be substantially more than 15% of revenue (unless the uptake is low)."
MTN and Vodacom are two other telecoms groups with a significant African footprint that have also shown an interest in investing in Ethio Telecom, according to several reports.
Jonathan Bachrach, telecoms analyst at GlobalData, said: "Ethiopia offers a large subscriber base which has been uncontested and has significant growth potential. Our forecasts indicate the country could add circa 30 million subscribers over the next five years, with the total number of mobile subscriptions rising from 71.2 million in 2018 to 101.1 million in 2023."
However, would-be entrants into the country would still face a number of challenges. Reformist prime minister Ahmed is facing ethnic tensions in the eastern part of the country, and the government recently shut down the internet there amid scenes of violence.
Violence broke out in Ethiopia’s Somali region, Reuters reports, with mobs targeting property owned by ethnic minorities, resulting in four deaths, according to witnesses. Connectivity, according to digital rights group Access Now, was down for around three days – the first time it had been cut since parliament ended a state of emergency in June.
The government involvement in telecoms, which will continue even if it opens up, according to previous announcements, means outside investors face a complex entry into the market.
In its report Ethiopia – Telecoms, Mobile and Broadband – Statistics and Analyses, the Market Research Hub says: "Although there is considerable investment in telecoms services – some $3.1 billion has been invested in telecom infrastructure and service expansion projects over the last decade – the sector is heavily regulated and the government has complete control over networks, with virtually unlimited access to the call records of all phone users and to logs of internet traffic."
It notes: "Most of the technologies deployed have been provided by ZTE and Huawei, which have often been favoured for offering vendor financing."