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2G/3G/4G

Safaricom-led consortium passes go in Ethiopia for $850M

State-owned Ethio Telecom no longer has a telecom monopoly in Ethiopia.

In a statement issued by Ministry of Finance and the Ethiopian Communications Authority (ECA) over the weekend, it was revealed that a consortium, dubbed Global Partnership for Ethiopia (GPE) – which includes Safaricom, Vodacom and Vodafone – had settled on an $850 million fee for a nationwide full-service telecommunications service operator license. GPE is expected to kick off with 4G services.

Other members of the winning consortium include British finance development agency CDC, Japan's Sumitomo Corporation, and the United States International Development Finance Corporation.

According to some local reports, Safaricom has a 56% stake in GPE, followed by Sumitomo (25%), CDC (10%) and Vodacom (6%). If correct, this leaves little room for Vodafone's share, although the UK-headquartered group holds a majority stake in South Africa's Vodacom Group and a minority stake in Safaricom.

South Africa's MTN, backed by Chinese investment, also put in a bid for a second license that is up for grabs. At $600 million, however, the offer was deemed too low by Ethiopia's government. A tender for the second operating license is slated to be re-issued "soon."

New era

ECA director general Balcha Reba said the decision to open the market "ushers in a new era of telecom service development in our country which will benefit millions of Ethiopians to have access to quality and reliable communication services."

He pointedly added that he was "very pleased that the consortium will invest $8 billion over the next 10 years" and looked forward to the creation of new jobs.


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Prime Minister Abiy Ahmed enthusiastically took to Twitter. "With over $8 billion total investment, this will be the single largest FDI [foreign direct investment] into Ethiopia to date," he wrote.

Some are skeptical about the veracity of the $8 billion investment figure, however. A person familiar with the bidding process, cited by the Financial Times, said the parading of the large sum was motivated by a desire to create a feel-good factor ahead of national elections scheduled for next month. "There's no way on earth you'll ever make money if you invest $8bn," the person said.

Sell-off

The Ethiopian government is also preparing to sell a 45% stake in Ethio Telecom, which has some 46 million subscribers. That would seem to offer a lot of room for growth. Ethiopia's population is around 112 million.

Ethio Telecom still has a monopoly on mobile financial services, although Prime Minister Abiy Ahmed, according to Reuters, said this market would be opened to competition after a year.

— Ken Wieland, contributing editor, special to Light Reading

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