Ethiopia breaks the monopoly of its telecoms sector through partial privatization

Welcoming other competitors into the telecommunications sector has become a priority to the Ethiopian government as the East African country plans to sell a 30 to 40 percent stake in its state-run telecoms monopoly to big telecoms companies and will split the company in two. This comes about a month after Ethiopian officials said some local firms have been permitted to provide internet services through Ethio Telecom’s infrastructure. They also said that the country has ruled out liberalizing the telecoms sector and the revenue it generates was being spent on infrastructure projects such as railways.

“There will be two telecom corporations and shares will be sold in both,” Prime Minister Abiy Ahmed said on Monday during a question and answer session in parliament.

Going further to explain the need for the new development, the 41 year old Prime Minister said “Somalia, with a population of 12 million, has four telecommunications firms. Ethiopia – with 100 million people – has one. There needs to be competition in the country.”

Ethio telecom is owned by the Ethiopian government and maintains a monopoly over all telecommunication services in Ethiopia. Ethio telecom generates revenue of over US$ 300 million for the Ethiopian government. With more than 16 million subscribers of internet services in the country of over 100 million people, Ethio Telecom is the continent’s largest mobile operator, according to IT Web’s report that noted that with over 57 million mobile subscribers as at November 2017, Ethio Telecom had beat MTN Nigeria to become Africa’s largest in terms of its mobile customer base.

Despite government’s wariness of private enterprise, both local and foreign firms are willing to work with the Ethiopian government. South African telecoms groups MTN and Vodacom both recently expressed interest in Ethiopia, making them possible potential investors. Excited about the potential opening of the Ethiopian market, MTN told Reuters that this development “would be a natural fit for MTN’s existing pan-African footprint.”

Vodacom too released a statement saying, “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.”

In the previous month, Ethiopia’s telecoms sector opened to limited competition, as officials on said some local firms have been permitted to provide internet services through Ethio Telecom’s infrastructure. The move to open the telecoms sector to limited competition will bolster competition in the country and expand the data market, officials said.

Known as Africa’s fastest growing economy and one of the world’s largest untapped markets, Ethiopia plan to liberalize its telecoms industry will open doors to huge potential investments both on local and foreign scene after selling stakes in its lucrative telecoms monopoly and other assets.

Stakes in its state-owned telecom company will be allocated to firms that are top 10 in the industry’s global chart. To ensure that the stakes are sold to qualified and efficient bidders, Abiy said “There will be one year or two years of intensive study taking place (before the shares of Ethio Telecom are sold).” The stake sales are part of a raft of measures announced by Abiy who came into office in April.