Ethio Telecom facing break-up before privatisation
June 18, 2019,
(Mobile World Live) — Ethiopia reportedly plans to split the country’s incumbent operator into two separate businesses prior to a potential sell-off to outside investors.
Citing comments made by minister of finance Ahmed Shide to a state-affiliated broadcaster, Reuters stated the plan was to divide Ethio Telecom by “infrastructure and service sector lines”.
Details of the proposed privatisation remain sketchy. It is unclear if authorities will retain a sizeable stake in the new businesses and what terms may be put on international investors entering the market.
Modernising the mobile and fixed communications sector is a central policy of Prime Minister Abiy Ahmed’s government, which came to office in 2018.
Last week, the country’s parliament approved a bill to create an independent communications regulator, described by officials as a “huge step” in reforming the sector.
Two of Africa’s major operator groups, Vodacom and MTN, have made no secret of their interest in making a play in the country given its potential.
GSMA Intelligence figures for Q1 2019 estimated the country has 41 million mobile connections, with 4G penetration below 9 per cent.
Ethiopia’s Privatization Programme Attracts Major African Telecom Operators
February 12, 2019
(Venture Africa) — Following the progress of Ethiopia’s telecom privatization process, Pan-African telecom operators MTN, Orange and Vodacom are among those trying to enter the second most populated country in Africa.
The state-owned telecommunications corporation, Ethio Telecom, took a major step forward in its much-anticipated privatization by pre-selecting six consultancies in partnership with the World Bank. It will be split into two businesses, offering tremendous growth potential to new entrants.
Ethio Telecom was selected as the first of four major state corporations in telecommunications, aviation and banking sectors, to be sold to private investors. This is in line with the decision to liberalize the economy and privatize state-owned companies, as part of reforms championed by Prime Minister, Abiy Ahmed.
With a population of over 100 million people, Ethiopia has been one of Africa’s fastest growing economies for years, but the country is reportedly now reaching the limits of its state-led growth, prompting the government to open up its economy. The government hopes to stimulate the country’s development and economic growth by attracting more foreign direct investment.
The communications director in the country’s Ministry of Finance, Haji Ebsa, said last week that the government will give priority to the partial privatization of Ethio Telecom as it considers the best approach for the entire process. While majority stakes will be held by the state, shares in the corporations will be sold to investors.
“Technical and steering committees have been established under the Finance Ministry, as well as a macro committee under the Office of the Prime Minister,” Haji added.
Other state-owned corporations lined up for liberalization are Ethiopian Airlines, Ethiopian Shipping & Logistics Services Enterprise and Ethiopian Electric Power, opening them up to private investments.
The country’s long standing economic system
The ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) coalition, which has been in power since 1991, has long supported deep state involvement in the economy making Ethiopia one of the most closed and controlled economies in Africa.
Last year, the coalition revealed that the country needed economic reforms to sustain rapid growth and boost its exports. This was perhaps most echoed by Prime Minister Abiy, who promised a new political beginning and implementation of real economic reforms when he came into power in April 2018.
Although, the new premier had signaled to local businessmen that the government would remain involved in infrastructure, banking and telecoms, making the move to liberalize sectors of the economy surprising.
Many of Ethiopia’s private businesses were nationalized in the 1980s under the former communist Derg regime before the government was toppled by the EPRDF, which has been shifting towards a market-based economy since coming to power in 1991.
Ethiopian PM outlines plans to split Ethio Telecom in two, sell shares in both companies
(TeleGeography) — Ethiopia’s government is planning to break state-run monopoly provider Ethio Telecom in two and then sell a 30%-40% stake in both of the companies created by this move, with a view to spurring competition in the local telecoms sector. According to Reuters, the plan was outlined by Prime Minister Abiy Ahmed yesterday (18 June) during a question and answer session in parliament, where he noted: ‘There will be two telecom corporations and shares will be sold in both … Somalia, with a population of twelve million, has four telecommunications firms. Ethiopia – with 100 million people – has one. There needs to be competition in the country.’ Further, the PM also specified that he wants the holdings offered in the two telcos to be sold to high-profile companies, adding: ‘The stakes in Ethio Telecom will be allocated to firms that are ranked top ten in the industry globally.’
As previously reported by CommsUpdate, earlier this month Ethiopia’s ruling EPRDF coalition confirmed its intention to open Ethio Telecom to investors, and the news saw two of Africa’s more notable telecoms groups express an interest in taking up a position in Ethiopia. South Africa’s MTN Group said it was excited by the potential opening up of the Ethiopian market, noting that it would be ‘a natural fit for [the company’s] existing pan African footprint,’ and adding: ‘Ethiopia presents many exciting telecommunication opportunities and we look forward to further discussions with that nation’s authorities on potential partnerships and opportunities.’ Meanwhile, another South Africa-based company, Vodacom Group – itself majority owned by the UK’s Vodafone Group – said of the development: ‘Vodacom has said on many occasions that Ethiopia is an attractive market so it follows that there would be interest. Naturally this is dependent on what might become available and if it fits within our investment parameters.’