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PM directs team to proceed with telecom privatization, liberalization

Prime Minister Abiy Ahmed (PhD) directed his macroeconomic reform team and the Privatization Advisory Council members to proceed with the process of privatizing 40 percent of Ethio-telecom as well as liberalizing the telecom market by issuing two service provider licenses. The PM directed his team on Monday, October 26, 2020 at the final consultation report after discussing with stakeholders.

The report was presented by the Ethiopian Telecommunications Authority (ECA), the Ministry of Finance (MoF) and Ethio-Telecom to the PM and members of the macroeconomic as well as the advisory council.

Presenting his report, Balcha Reba, the Director General of the ECA, said consultations were held with various telecom service providers, ICT service providers, ICT using companies and experts in the field. He went on to add that consultations were also held with those who have raised issues relating to the compatibility of the telecoms sector reform objectives and the macroeconomic reforms including reform measures taken over the past two years, frequency bands to be provided through bidding, infrastructure development and infrastructure construction companies, universal access and service, scope and type of the licenses to be issued, the bid process as well as national roaming.

Accordingly, participants asked for the compatibility of the licensees’ activities in the country with the investment proclamation and regulation. In this regard, concerns were raised regarding the provision that leaves retail businesses to the local people being breached as the licensees are going to sell sim cards and mobile apparatus at their shops.

In his response to the concern raised, Balcha said that the operators will be allowed to sell their sim-cards while they can sell mobile apparatus along with the sim. However, they cannot be involved in the retail of mobile phones. They can also provide post-sales support, since all are international practices in the sector.

On top of this, telecom service providers will be required to provide free of charge services to non-profit entities for the public good.

The Authority has availed five bands for service providers. New operators will be given 80MHZ band, while ethio-telecom gets a 100MHZ of the total bands. From the 800MHZ band, all operators including ethio telecom will have 10MHZ. From the 900MHZ and 1800MHZ bands, new entrants will be given 10MHZ and 20MHZ bands respectively, while ethio telecom will retain 15MHZ and 35MHZ from each band. Each operator will be assigned 20 MHZ from the rest 2100MHZ and 2600MHZ.

According to Balcha, participants raised concerns regarding a digital financing option which is not allowed to foreign entities including the new operators entering the market. They stressed that this ban could affect the gains from the two licenses to be issued soon.

Balcha made recommendations to the National Bank of Ethiopia (NBE) to reconsider as participants indicated that allowing ethio telecom to engage in digital banking and banning others could create unfair competition in the market.

Concerns regarding ethio telecom’s infrastructure capacity to carry the load brought by the new entrants were also raised. Hence, the participants requested for an inventory of ethio telecom’s infrastructure and for it to be made public. Unless the detailed status of ethio telecom’s infrastructure is not presented, it could create investment uncertainty.

New entrant telecom service providers are required to expand their voice, text and broadband data reaches in a given time. Accordingly, within 12 months of entering the market, they are expected to reach 25 percent of the country. Within 24 months, they are expected to expand to 40 percent, in 36 months to 55 percent, in 48 months to 70 percent, in 60 months to 80 percent, in 84 months to 90 percent, in 120 months to 95 percent, and in 180 months to 97 percent.

However, Balcha remarked, some potential bidders for the licenses said that it would be difficult to reach 55 percent of the country within five years (36 months).

National security issues as well as the need to call for investments in constructing infrastructure and renting companies was also at the center of the discussion.

For her part, Frehiwot Tamiru, CEO of ethio telecom, said that while people expect competition and private sector involvement, economic growth and development, service and infrastructure improvement and human capital development from the privatization of 40 percent of ethio telecom’s stakes, the money from the sales would go towards strengthening the company or for the government’s other purposes.

However, she vehemently opposed any questions regarding allowing infracom companies to construct and rent out towers and other telecom infrastructures. She said this will not help the sector and also makes ethio telecom’s investments useless as it has already covered 85.5 percent of the country geographically, and 95 percent of the total population.

Replying to questions regarding mobile banking, PM Abiy said that the invitation is issued only for companies to participate in providing telecom services and this will be conducted according to the country’s national interest. He said that the government does not intend to crush the banking industry that grew under protection for decades.

“The Ethiopian government invited only telecom service providers. The banks can work with any operator of their preference. But no operator can operate in place of the banks,” he stressed adding, “We allow them only in accordance with our national interest.”

In order to avert or prevent any threat to national security, there are institutions like the Information Network Security Agency (INSA) and a Cyber Force department within the National Defense Force, Abiy said. “And if there is any perceived threat, there is a legal procedure for a lawful interception; this is how the world operates,” he told the gathering.

According to Abiy, countries build their strength through attack and prevention exercises, and the entrance of the new operators would present an opportunity to build capacity. Since there is no one that is 100 percent secure within the digital world, preparations are made under various institutions to thwart potential threats.