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BusinessSafaricom negotiates infrastructure lease payment in two currencies

Safaricom negotiates infrastructure lease payment in two currencies

Safaricom Ethiopia and Ethio Telecom have reached an agreement to use both the US dollar and birr as payment modalities for telecom infrastructure sharing between the two operators.  

The two telecom operators concluded a multi-round of negotiations on Thursday, reaching an agreement to share the infrastructure such as tower, transmission and interconnection, which had taken seven month to conclude.

The negotiations centered on whether the payment was to be made in Birr or in US dollars.

Ethio-telecom demanded the payments to be made in USD, while Safaricom insisted for Birr. In this case, the Ethiopia Communication Authority (ECA) is interceding, according to Balcha Reba, director general of the Authority.

Under this agreement, the payment will be in both currencies, with varying ratio across the infrastructure type.

“The ratio can be 70/30 for certain infrastructure lease, while it can be 40/60 for others. The main objective is to make certain a return on investment from the infrastructure built with public money,” said Balcha.

The infrastructure sharing agreement is critical for Safaricom to meet its deadlines. Its Public Relations and Communications Manager, Tewedaj Eshetu, said the company is yet to sign a contract on infrastructure sharing.

“We have agreed in principle on power sharing, interconnection and tower sharing but it is not concluded as we are yet to sign a final agreement,” said Tewedaj.

The ECA had given Safaricom a shorter deadline to start to modernize the telecom service soon and expand the telecom industry. However, an interconnection agreement is required for a seamless service, which is one of the reasons for the delayed implementation. The consortium entered obligation to launch commercial service on April 9, 2022, which has already passed.

“Safaricom can launch the telecom service as of now, using its own infrastructure it already developed in major cities. However, the call works only in-between safaricom customers. To interconnect with Ethio-telecom customers, the infrastructure sharing agreement is key,” added Balcha.

Safaricom, a new entrant to the sector, will compete with Ethio-Telecom from April onwards and can use existing infrastructure to render service.

Currently, Safaricom has completed their own network, customer handling system and test calls in various cities, with works in Addis Ababa, Bahir Dar, Hawassa, Dire Dawa and Harar undertaken.

Safaricom is expected to reach 25 percent of Ethiopia’s population in its first year, 50 percent in three years, and 97 percent on the 15th year, when its license expires.

According to a new regulation the ECA is preparing, the license will be renewed only if the operator fulfills these obligations. Currently, the ECA is considering to extend the launch day by ‘one or two months’, according to Balcha.

“This is because we understand the challenges. But extending the launch date will affect Safaricom’s time schedule to meet next deadlines,” said Balcha

Ethio Telecom reached 90 percent of the population in 127 years.

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