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BusinessAuthority envisages four telecom operators in Ethiopia

Authority envisages four telecom operators in Ethiopia

It anticipates several years of grace period between License B & License C

The Ethiopian Communication Authority (ECA) foresees at least four unified telecom operators are needed for Ethiopia, given the population growth and diversifying digital service demands. An operator is estimated to serve 30 to 40 million people in the country.

The authority disclosed on November 16, 2022, that preparations are underway to float a Reference of Interest (RoI) to fetch potential investors who can acquire the third license or the second new full-service license (License B).

License A was given to Safaricom in May 2021, which became the second license issued after the state-owned ethio telecom, but the first for a private operator.

The bid for License B was initially floated in September 2021 but suspended in December 2021, following the disinterest of foreign investors due to the extended war in northern Ethiopia at the time.

The Ethiopian government expected USD 1.15 billion for license A, though the consortium led by Safaricom won it for USD 850 million, which became the minimum threshold. MTN, among the operators expected to bid for License B, lost the bid for License A, offering USD 650 million at the time.

However, following the peace agreement signed in Pretoria between the federal government of Ethiopia and the Tigray People’s Liberation Front (TPLF), Ethiopian officials expect a better offer this time around.

The ECA is currently preparing to conduct a stakeholder consultation to collect input before floating the terms of reference for the License B bid. The consultation, which started on November 16, 2022, will continue until December 16, 2022.

Interested parties are invited to submit written comments in a format prepared by the authority. Once the consultation is wrapped up, the authority will float the international bid for License B.

One of the issues the ECA wants to hear from the stakeholders during the consultation is how long the interval should be between the issuance of License B and License C. The document prepared by the authority for public consultation states there should be a grace period after License B is awarded.

“We propose to provide a grace period during which the ECA will not issue additional unified telecommunications operator licenses (and accompanying radio frequency spectrum licenses),” the document states.

This will allow the market to develop and provide the basis for deciding whether additional market entry would be useful in promoting the provision of high-quality, affordable services for consumers, according to the document.

“The number of telecom operators we will have in Ethiopia should be proportional to the population size, service demand, and average market share of the operators,” Balcha Reba (Eng.), director general of the ECA, said.

Balcha says proportionality is critical for market continuity over the next twenty years. “Having four unified telecom operators can maintain a highly lucrative telecom business and equally large market shares.”

The director said that the ECA has conducted an assessment that has concluded that at least four major players are sufficient for Ethiopia.

“Nigeria, Ethiopia, and Egypt have the top three populations in Africa from which lessons were drawn to determine the number of telecom operators Ethiopia needs,” Balcha said.

Balcha explained that the Internet of Things (IOT), space science, vehicle tracking systems, internet televisions, online education, digital health, digital finance, and other technologies will require at least four big unified telecom operators in Ethiopia.

“But this does not mean we are going to issue the license right now. We have our own estimation for the grace period. License B might request five or 10 years. License C can also request another grace period. What we hear from this public consultation will be used as an indication when we float the bid for License B,” added Balcha.

Safaricom requested a 10-year grace period, of which two have already passed.

The ECA also proposed to make it mandatory for ethio telecom and incumbents to provide roaming services to other licensees for a period of 36 months after the license is awarded. This means new entrants will rely on the incumbent’s infrastructure for the first few years until they build their own.

At the same time that the authority is gearing up to issue license B, the Ministry of Finance has also requested an Expression of Interest (EoI) to sell 40 percent of ethio telecom, on November 16, 2022.

The privatization of ethio telecom was also suspended due to the war in northern Ethiopia. The evaluation of ethio-telecom is now being facilitated with the support of Deloitte Consulting Ltd.

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