Vodafone, MTN Groups Bid for Telecom Licenses in Ethiopia

(Bloomberg) -- MTN Group Ltd. and a consortium led by Vodafone Group Plc have bid for telecommunications licenses in Ethiopia, as wireless service providers look to tap the last remaining large market in the world.

Ethiopia will take a few days to review the technical offer and then open the financial bids, said Brook Taye, an adviser in the Finance Ministry.

Earlier on Monday, Kenya’s largest telecommunications provider Safaricom Plc said it was bidding for one license jointly with Vodafone and the U.K. carrier’s South African unit Vodacom Group Ltd. Others in the consortium include CDC Group Plc and Sumitomo Corp., it said in a notice.

Ethiopia, Africa’s most populated nation after Nigeria, is poised to expand 8.7% next year, according to the International Monetary Fund, making it the fastest growing economy on the continent. That’s even as the nation battles multiple crises, including a civil conflict in the northern Tigray region, that’s threatened Prime Minister Abiy Ahmed’s economic transformation agenda.

“We always wanted quality providers and this is what we have received,” Brook said on phone. “These are two African giants -- the Safaricom-led consortium and MTN -- either one or two of the operators will get a license in Ethiopia.”

International telecommunications operators have long coveted a foothold in Ethiopia, which has a population of more than 110 million and with only 50.7 million subscribers, is seen as one of the world’s last major untapped markets. The government is looking to award two full-service telecommunication licenses as part of its plan to attract more foreign investment to its economy. Orange SA and Emirates Telecommunications Group are among the 12 players who had shown initial interest.

Mobile Money

“Based on the potential payback period and the return on investment, in relation to the potential cost of market entry, there might not be many mobile operations willing to set aside capital or take on debt to finance market entry,” said Renaldo D’Souza, head of research at Nairobi-based Sterling Capital Ltd.

Some companies dropped out due to concerns about being unable to access Ethiopia’s potentially lucrative mobile phone-based financial-services market under the license, and to set up some of their own key infrastructure, according to Brook.

“The biggest obstacle is the bar on foreign ownership of mobile money businesses -- both Safaricom and MTN have this as an integral part of their normal business model and would want to offer the service in Ethiopia alongside telecom services,” said Bloomberg Intelligence analyst John Davies.

Mobile-money services are excluded under the licenses on offer, which would also require the new providers to use the existing tower networks. The entrants will compete with Ethio Telecom, the state-controlled monopoly in which the government separately plans to sell a 40% stake.

“It is slightly surprising that only two bidders have got to this stage, given the level of interest and the nature of the other interested parties,” Davies said. “Some of them may indeed have been put off by the Tigray situation, or may be looking to invest in the part-privatization of Ethio Telecom,” he said.

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