Ethio Telecom rollout three-year growth strategy
- Inks deal with KPMG to conduct asset valuation - Requests NBE permission to launch Mobile Money
Ethio Telecom has rolled out a three year development strategy which it said would enable it to thrive in a competitive market.
The development strategy dubbed “Bridge” is believed to transform the state-owned monopoly into a competitive company as the government is working to liberalize the telecom sector. The development strategy would be implemented in the 2019-2022 budget years.
At a press conference held yesterday, CEO Frehiwot Tamru revealed that her company would not introduce massive multimillion dollars telecom infrastructure projects due to foreign currency shortage and other circumstances. Instead, she said, the company would make incremental growth by optimizing the existing infrastructure. According to Frehiwot, Ethio Telecom would rotate some of the infrastructure and use them efficiently.
However, she said the company would expand and improve the mobile network infrastructure. “We will not unveil a 1.2 billion dollar expansion project as we did in the past but we will make incremental expansion and growth,” she said.
The three-year development strategy focuses on ensuring customer experience, reputable brand, innovative products and services, develop people-oriented learning organization and growth in financial capacity and excellence in operation. “The strategic issue is to make Ethio Telecom competitive, competent and preferred service provider company,” Frehiwtot said.
The strategic plan, which is approved by the board of directors, chaired by Eyob Tekalign (PhD), aims at addressing changing customer demand, digital inclusion to create better digital economy enhance productivity, shift the revenue from traditional revenue streams to value added and content driven services by introducing new business streams and solutions like internet of things, application programing interface and mobile money.
Mobile Money and Data Cloud are some of the new telecom services that Ethio Telecom is planning to start in the coming three years. Frehiwot told The Reporter that Ethio Telecom has requested the National Bank of Ethiopia for permission to start mobile money services. According to a study undertaken by Ethio Telecom, the country can generate 13 billion dollars by 2025 from mobile banking. “If we get the permit we have the infrastructure that supports mobile money,” she said. Customers can pay fines, service fees using mobile money. The company plans to offer 39 new and 23 revamped local and international products and services.
Frehiwot said since the trend shows that users demand has shifted from voice to data and internet Ethio Telecom would expand its mobile network coverage. “We will upgrade the existing mobile network and build new ones in Addis Ababa and regional towns. We will deploy 4G network in Addis Ababa and major regional towns,” she said. There are 4G mobile network in 332 sites in Addis Ababa which can accommodate 400,000 customers.
The development strategy is divided in three fiscal years. The first fiscal year 2019-2020 has already started implementation last month. In the first fiscal year, Ethio Telecom plans to increase the total number of subscribers from 43.6 million to 50.4 million. The company plans to increase mobile subscribers by 15 percent to 48.3 million, data and internet users by 29 percent to 28.7 million and fixed broad band subscribers by 166 percent to 240,000. Fixed line subscribers from 1.22 million to 1.31 million and data only from 503,000 to 835,000.
Consequently, the company aims to boost tele density from 44.5 percent to 50.5 percent and revenue from 36.3 billion birr to 45.4 million birr. The revenue share will be 53 percent from mobile voice, 33 percent from data and internet, nine percent from international business and five percent from value added services. The company hopes to increase its revenue from international business from USD 98.3 million to USD 138.3 million.
The company will increase the number of distributers from 168 to 206 and retailers from 167,000 to 242,000. “We will encourage customers to use electronic top up service. We eventually will migrate the public to digital economy,” Frehiwot said.
Frehiwot declined to disclose the total amount of investment required to execute the development strategy over the three year period citing that since the telecom industry is dynamic things will change so does the capital expenditure. “For instance in 2019-2020 budget year there will not be a change in ownership. In 2020-2021 there could be a change in ownership and new operators will be joining the market. All these developments will change the forecast. So, disclosing the required investment now might be misleading,” she said.
Regarding the ongoing privatisation process Frehiwot said the Ministry of Finance is undertaking all the required preparation work. Asked if Ethio Telcom would be spitted into two entities – Service and Infrastructure – Frehiwot said it will not be divided legally. “New telecom operators might use our telecom infrastructure and to make that possible it might be necessary to divide it into two for accounting purposes. But it should not be two separate entities,” she said. “We will consult with the Ministry of Finance on this issue,” she added.
In a related news Ethio Telecom has hired the international consulting firm KPMG to conduct it asset valuation. The two parties signed the agreement on August 20, 2019.
As part of the pre privatization work Ethio Telecom needs to asses the value of its total asset. Accordingly, it invited Deloitte, PricewaterhouseCoopers, Ernst and Young, KPMG and Grant Thornton to present their proposals. After evaluating all the proposals Ethio Telecom has selected KPMG. “After series of negotiations we have awarded the contract to KPMG,” Frehiwot told The Reporter. KPMG will be paid USD 970,558 for the job.
According to the contract, KPMG will conduct asset inventory and valuation work in the capital Addis Ababa and all the regional states. KPMG agreed to complete the work in 70 working days.
“The market liberalization will have challenges and opportunities. As much as possible we are preparing ourselves to exploit the opportunities and withstand the challenges,” Frehiwot said.
Industry analysts fear that one of the challenges that Ethio Telecom would face in addition to intense competition is staff outflux to new operators in search of better pay. “Giant telecom operators that would join the market might lure away Ethio Telecom IT experts,” they said.
Frehiwot said that Ethio Telecom is committed to train and certify its professionals and offer better salaries and other benefits. The company introduced a new variable payment mechanism by which they are paid additional payment based on their performance. “They will get additional payment when accomplish their work above the target set. We have also facilitated a housing loan agreement agreements with banks. We are trying to create a conducive working environment,” she said.