Ethiopia Pledges to Allow Mobile Money for New Telecom Entrants

Ethiopia has pledged to allow prospective owners of new telecom licenses to offer mobile-banking services at some point after entering the market, according to people familiar with the matter.

The initial exclusion of mobile money from the auction process had caused wireless carriers to hesitate over bidding for the new spectrum and influenced the amount they were prepared to offer, said the people, who asked not to be identified as the process is ongoing. The state also backtracked on an insistence that new entrants rent infrastructure such as telecom towers from state-owned Ethio Telecom indefinitely, they said.

The concessions are part of Ethiopia’s drawn out effort to open its telecom market to outside investors, a central tenet of Prime Minister Abiy Ahmed’s plans to reform the economy and generate foreign exchange. A consortium of Johannesburg-based MTN Group Ltd. and China’s Silk Road Fund submitted a bid earlier this week, as did a group including the U.K.’s Vodafone Group Plc and African partners.

A response to the two offers is expected in coming days, the people said.

Eyob Tekalign, the Ethiopian state minister responsible for the privatization process, couldn’t be reached for comment. Vodafone and MTN declined to comment on an ongoing process.

Privatization Plan

Wireless carriers on the continent see mobile money as a major generator of revenue, as hundreds of millions of people use their phones for payments rather than traditional banks. M-Pesa Africa, the continent’s biggest such service and co-owned by Safaricom Ltd. and Vodacom Group Ltd., is valued at $14 billion, according to a research note by EFG Hermes.

Ethiopia’s decision to open up the telecom industry was taken in mid-2018 and was initially part of a much wider privatization program, taking in sugar factories and railway infrastructure among other sectors. But the process has been hit by numerous setbacks, including the coronavirus pandemic, delayed elections and the regulatory complexity that comes with organizing a sale.

The business case for phone companies was at first straightforward: Ethiopia has a population of more than 110 million, the second largest in Africa, yet less than half its people have mobile-phone subscriptions.

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