Gov’t anticipates big payday from privatization
After much speculation surrounding the privatization of Ethio-telecom, a telecom monopoly in Ethiopia, the Ethiopian Telecommunications Authority (ECA) has invited potential bidders to express their interest in acquiring a stake in the state-owned giant, which is projected to fetch billions of dollars to the cash strapped Ethiopian economy.
Brook Taye (PhD), senior advisor to the Ministry of Finance, while launching the expression of interests (EoI) on Thursday, told The Reporter that three major positive outlooks are anticipated.
“Though there is huge market volatility as the COVID-19 pandemic impacts the global economy, we do understand that telecom operators are doing great in terms of sales as people in lockdowns increase their demand for such services. You may freeze buying certain commodities for the time being. You may not prefer to buy a shoe now, but still you cannot stop paying for telephone bills even under strict quarantine measures,” Brook said.
He argues that global telecom operators are making small fortunes during this pandemic time, since they have seen a surge in the demand for their services. In addition to that, the global credit market is offering attractive loans to its customers, enabling telecom operators to secure sizable and affordable credits. In addition to that, global bidders also know that Ethiopia’s telecom sector is “a virgin market,” Brook said adding that the expected operators should have a sound balance sheet with measurable successes in the industry.
“When you triangulate these points, I think it is the most opportune time for Ethiopia to generate big money out of privatization,” Brook said.
The idea of launching the EoI is to reach as many potential bidders as possible including those anticipated operators which have already shown interest. In the interest of transparency and openness, the government is considering creating a common information platform accessible to all bidders. The deadline for submission is set for June 22, 2020 and telecom industry bigwigs like Orange and others are expected to make offers.
“We hopefully expect billions from the sale of the spectrum licensing, as it has been the case elsewhere. We surely expect huge direct revenue from the transactions.”
It is also expected that the licensing process will be finalized before the new Ethiopian fiscal year. Meanwhile, Ethio Telecom, the state telecom monopoly, will see 40 percent of its stake privatized.
The ECA is managing the license issuance process marking a major step in the liberalization of the telecommunications market. “The issuance of the two new licenses to telecommunications companies, in addition to the existing license held by Ethio Telecom, is part of the Ethiopia’s Homegrown Economic Reform Agenda to introduce competition into the sector,” ECA said in a press release.
The privatization of the telecom sector is considered by the government as a primary undertaking to increase access to reliable and efficient communications services for all Ethiopians, leading to improvements in quality and price, ultimately supporting rapid economic transformation by leveraging the digital economy.