Ethiopia May Scrap Telecom License Sale if Offers Are Too Low

Ethiopia has a set amount it expects to receive from the part-privatization of the country’s telecommunications industry and could scrap the process if bidders don’t meet the target.

Three independent teams have calculated the value of two new licenses that would compete with state monopoly Ethio Telecom, Eyob Tekalign, the state minister responsible for the privatization process, told reporters. That has given the government an amount it’s looking to raise from the sale, he said, without giving figures.

“If we get the value we expect from the bidding process, we will go ahead,” he said. “If not, we will have another look.”

His comments mark the first time an Ethiopian politician has publicly cast doubt over the much-anticipated liberalization of the telecom industry, a move that would jeopardize a broader privatization plan announced by Prime Minister Abiy Ahmed in mid-2018. The strategy had a range of goals: to shore up reserves of much-needed foreign exchange, pay down state debt, improve telecom service and create jobs.

International telecom operators have long coveted a foothold in Ethiopia, which has a population of more than 100 million and is seen as one of the world’s last major untapped markets. Interested parties include Vodafone Group Plc and its two African partners, Vodacom Group Ltd. and Safaricom Ltd., as well as MTN Group Ltd. and Orange SA. Alongside the two new licenses, a minority stake in Ethio Telecom is also up for sale.

The government had looked to wrap up the process by early 2020, but regulatory complexities, the coronavirus pandemic and the prospect of now-postponed elections delayed proceedings. Potential bidders also expressed concern about the exclusion of private tower operators in the process, and the potential for mobile-money licenses.

International tower companies won’t be allowed to take part, Eyob confirmed this week, saying wireless operators can lease existing state-owned masts for the time being.

“We shouldn’t have infrastructure that we have spent billions on going to waste,” he said.

Eyob also sought to address concerns that Ethio Telecom would be given preferential treatment in the newly part-privatized industry, after reports in local media that only the incumbent would be allowed to offer mobile-money services. The ability to offer payments through phones is seen as crucial to bidders, given its importance as a revenue stream in parts of Africa with limited banking infrastructure.

The government and regulator would “provide an equal playing field,” Eyob said, without being specific. That said, Ethiopia’s current laws don’t allow for foreign companies to participate in the financial sector, which would include mobile money.

©2021 Bloomberg L.P.

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