Telecom Monopoly Finally Ends in Ethiopia as 2 Int’l Telcos Set to Begin Operations

Weighing MTN, Safaricom's Chances of Success as Ethiopia Shortlists Six Operators for Two Int'l Licences

Following back and forth privatisation plans, the Ethiopian Communications Authority (ECA) has disclosed that two (2) new international telecom operators will begin operations in the Ethiopian market by April 2021.

Speaking to reporters about the progress on telecom reforms, Director General of the Authority, Balcha Reba stated that official unveiling of the two operators will commence within the next two weeks.

Recall that Ethiopia resumed telecom privatisation plans in August after previously stalling the process.

In August, the ECA restarted plans to open up the country’s telecom market to two (2) other operators by selling a 40% minority stake in the state-run monopoly, Ethio Telecom.

12 telecom companies had submitted bids to compete for two mobile network operating licenses, according to the ECA. MTN Group, Orange, Safaricom and Etisalat were reportedly among the bidders.

ECA Director General, Balcha Reba noted that financial and technical capacities as well as network security were some of the key requirements considered by the Authority during the process of selecting the best qualified operators.

He also mentioned that the ongoing privatisation of Ethiopia’s telecom sector will increase telecom network coverage, raise the sector’s financial capacity and boost digital development.

With about 70 million Ethiopians not subscribed to any mobile network, the telecom reform is crucial to increasing network access across the country especially in rural communities.

Huge Market for Incoming Telcos

While the ECA has yet to reveal the full details of the privatisation deals, it has been disclosed that each operator will acquire a 20% stake in the government-owned Ethio Telecom.

MTN could be one of the (2) incoming telecom operators in Ethiopia

Ethio Telecom caters to about 46 million subscribers in the country. Although data on Ethio’s market value is not available, the company reported a total revenue of 47.7 billion ETB (US$1. 35 billion) for its financial year ending 30 June 2020.

It can therefore be inferred that the Ethio is a multi-billion-dollar company and a 20% stake would be worth hundreds of millions of dollars.

That said, up to 70 million people in the country are still not connected to any mobile network. Ethio generates most of its revenue from voice calls -voice services accounted for 50% of the telecom’s revenue for FY 2020.

Knowing this, the two incoming operators will look to leverage the opportunity of adequately serving the internet needs of millions of Ethiopian mobile users.

Internet Usage to Increase With Competition

The imminent entry of two international mobile network operators into Ethiopia’s telecom industry will drive an increase in internet usage among the people. Ethiopia’s current internet population of 24 million represents only 20% of the over 115 million people in the country.

Ethio telecom, the sole telecom operator in Ethiopia, offers data, voice and SMS services to 40% (46 million) of the country’s population. However, only 24 million of the 46 million Ethio subscribers use internet and data.

Factors responsible for this range from Ethio’s slow and unstable internet connection to its expensive data tariffs. These probably triggered the loss of 20 million subscribers who opted out of the network between 2018 and 2020.

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According to a 2019 research, the cost of living in Ethiopia is estimated at 4,200 ETB (US$110) per month. Although the government has yet to settle on a minimum wage, the average monthly minimum wage is about 2,250 ETB (US$59), according to Salaryexplorer.

Based on these figures, the average Ethiopian earns 1,950 ETB (US$51) less than the cost of living per month. Therefore, a large proportion of people do not even earn enough to offset living expenses, much less purchase data plans.

Ethio’s 1gb monthly data is priced at 100ETB. Considering that this is about 4% of the average minimum wage, many Ethiopians probably prefer to spend on voice and SMS instead. 100ETB guarantees more than five (5) hours of voice calls in a month.

However, the low patronage of internet data plans will be significantly increased by competition provided by the incoming telcos. Competition has a way of forcing operators to review pricing and introduce tariff models they may otherwise not consider.

In Conclusion..

In Nigeria, MTN had insisted early on that it could not offer per second call rates to subscribers following several complaints about its per-minute billing. But the telco gave in to customers’ demands after Glo introduced per-second billing for its subscribers.

A similar situation could take place in Ethiopia. Ethio has so far failed to address criticisms from a number of subscribers over its poor internet service and high tariffs in recent years. Incoming MNOs will perhaps offer more affordable data plans and faster internet speeds which could compel Ethio to resolve these issues.

Whichever way, Ethiopia’s telecom sector will be poised for increased internet usage and adoption post-privatisation.

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