Long-last mile of telecom liberalization
It took more than 100 years for Ethiopia to set the telecom sector liberalized. It has been almost three years since this initial decision of the government was publicized.
Over the course of three years, major developments have been introduced. The much-anticipated liberalization process is currently edging to its final leg, as two additional telecom providers are about to join the Ethiopian market. A “2+1” approach as the government explains it will be the future of the telecom sector in Ethiopia where two new private operators and the existing monopoly, ethio telecom will share the market for the next 10 years.
In fact on November 27, 2020 the government formally issued a Request for Proposal (RFP) for telecom operator’s license. The person in charge of the liberalization process, state minister of Finance Eyob Tekalegn (PhD), says the government’s decision to open the telecom market was necessitated by the imperative to bring about a strong telecom sector. He noted that though the two companies anticipated to join the market would be allowed to build their own infrastructure, independent power and tower companies would be prohibited from building and renting infrastructure due to the huge investment ethio telecom already made in erecting such infrastructure, adding the existing infrastructure can accommodate the operation of the national monopoly and the two new entrants.
A regulator, the Ethiopian Communications Authority (ECA) was formed in 2019 and which in turn needed to formulate at least 18 major regulatory laws that intend to oversee the roles of the future private telecom operators. Only two telecom providers are welcome to join the sector.
The process of drafting directives and other governing laws needed to be followed by a series of public consultations. The latest round of meetings has seen 120 participants in a virtual meeting. It was partly a feedback gathering and an extension of ECA’s process of consultative meeting: “aimed at responding to stakeholders, and was an extension of the several months-long consultations as well as the Authority’s continued effort to ensure the process is achieved fairly and transparently.”
However, this process was considered to be hectic, and at some point, interested and anxiously waiting for telecom providers to join the sector, have been expressing frustrations. All did not equally welcome the fairness and transparency of ECA. In its recent press statement issued on November 22, 2020, states that “Despite this most transparent and engaging regulatory framework development exercise since October 2019, and currently underway by the ECA, it is unfortunate that unsubstantiated claims are being publicized by some operators on the licensing process to award two new telecom licenses in Ethiopia. Claims that the regulatory framework hasn’t yet been formally communicated to bidders is inaccurate and misleading.”
12 interested bidders
Across the board, the government has been able to receive both interests. A few months back, at least 12 private telecom providers have expressed their intent. Back in May, following the request of the government, companies such as Global Partnership for Ethiopia, a consortium of Vodafone, Vodacom and Safaricom; Etisalat; Axian; MTN; Orange; Saudi Telecom Company; Telkom SA; Liquid Telecom; and Snail Mobile have shown interest. Kandu Global Telecommunications and Electromecha International Projects, the two non-telecom operators, have expressed interest to join the Ethiopian market.
As a follow-up to that, as of November 27, ECA together with the Ministry of Finance to which the regulator reports, has issued a request for proposal notice which will remain on air for 90 days. The public notice closes on March 5, 2021. Bidders interested to acquire documents of Request for Proposal (RFP) must deposit USD 15,000 and sign a confidential agreement not to disclose the whole contents of the RFP document. RFP is a set of statements on how much money the needed two potential licensees.
From the track of companies that have expressed interest, one issue will and perhaps be startling to the onlookers and the government that those giant Chinese companies are missing from taking part in the process.
Some experts were anticipating that the likes of Huawei and ZTE companies from China preferably might have decided to join ethio telecom as the government had lingered partially privatize the state telecom monopoly. That was the experts’ view based on scenarios. That knowledgeable projection as well evaporated when the government scraps the partial privatization not take effect as immediate as the liberalization process. Both ZTE and Huawei are well associated with the development of the telecommunication infrastructure.
Both have taken major shares of the pie when the government invested USD three billion to install major telecom infrastructures in two phases over the years. At first, the state-owned ZTE was the champion and the most received Chinese company that landed on USD 1.5 billion telecom infrastructure development.
Later on, the love affair between ZTE and Ethiopian authorities have at some point deteriorated. During the second phase of the telecom infrastructure development, which saw a stack of USD 1.6 billion ZTE to share this investment cash equally with Huawei. Though expectations failed, these two Chinese firms had dominated the wider breadth of infrastructural projects in the telecom business.
Apart from the absence of Chinese firms, the government says major service providers are joining the telecom concourse. The government is seeking fair competition and quality service provision. The newcomers are expected to guarantee coverage and penetration level reach 98 percent of the population within five years. The companies are not tolerated for violations of market competition. No monopoly or cartel practices are allowed once the two private telecom service providers join the sector.
Why more service providers when ethio telecom enjoys the best out of the market? Well, the government has reasons for that. Veteran experts of the sector, former employees of ethio telecom the then Ethiopian Telecommunication Corporation (ETC), and ardent advocates of non-privatization of ethio telecom have repeatedly expressed frustrations and opposed the privatization as well as the liberalization of the sector.
Back in September 2019, the government was under fire for its proposed SoE privatization. The former president of the Addis Ababa Chamber of Commerce and Sectoral Association, Kebour Ghenna was one of the critics against the measure. Kebour, a private-sector advocate and a renowned entrepreneur, contended that the administration’s swiftness to denationalize public properties would possibly dent the autonomy of Ethiopia. According to him, the privatization line the administration has booked “will do no good, but rather drag the nation into a messy passage. If once entered, there will be no way out.”
But for Brook Taye (PhD), a senior advisor to the Ministry of Finance, denationalization as he pointed out is a chunk of the entire economic reform program that has been veering for months now. He tells the privatization course as having to do with sewing the inept public enterprises that dearth virtuous business fundamental.
According to Kebour, denationalizing ethio telecom will seriously emasculate Ethiopia’s “sovereignty”, saying that granting the telecom sector to private operators, will lead to detrimental consequences if these overseas firms departure on depraved footings. Kebour indorsed the government should go-slow with the route and let native business and Ethiopian citizens obtain a share of the public enterprises, in place of vending them to outsiders that principally pursue proceeds with short-term goals.
As many backing the opinions of Kebour, here are those who alike agree with the position of the government in its privatization route. Samuel Alemu, a partner at ILBSG LLP law-firm based in the US, a graduate of Harvard Law and Wisconsin-Madison Law School, says that there are pros and cons to privatization. In a commentary article written to The Reporter, Samuel once said, “A good thing about privatization is that it increases the inflow of currency to the economy. This is particularly relevant for Ethiopia, which experiences a shortage of foreign currency and, for this reason, may fail to fulfill its corporate and political obligations,” he said adding, “By selling state corporations and putting them into the hands of private investors, governments can create better conditions for achieving sustainable efficiency and profit.”
Ethiopia, together with Eritrea and Djibouti stands out to be among the few countries that have upheld monopoly over its telecommunications sectors. Until 2013, Myanmar used to be in the same craft as Ethiopia. Alike what Ethiopia is progressing now, Myanmar took denationalization its telecom sector. Invited two private companies to bid and run the service. The country decided to partly sell the stakes of the state-owned operator. When Myanmar witnessed marks of progress, it went to look for more operators to join its flourishing sector.
Half the size of Ethiopia and with a total area of 700,000 square meters, Myanmar was clever to get its 3G internet coverage from five percent pre-privatization to 90 percent after privatization. Mobile service prices fell by 300 percent and its telecom service coverage penetration or a machine-to-machine operation went up to 103 percent from the previous, 13 percent.
Even though what was achieved there was excellent, the ECA director-general wants to see more than that happening for Ethiopia. “Myanmar’s state telecom operator, after going through with its partial privatization process, was able to become more competitive than the three private operators,” Balcha Reba, director-general of the Ethiopian Communications Authority once told the press. He said, “It is not the time to continue with the status quo, as the technology keeps moving quickly.” Balcha emphasized the requisite for concepts such as the World One Web, a company working on creating mobile internet services from a balloon, which would become a major disrupter to the existing telecom infrastructure, putting it under serious risks.
Well, as to ethio telecom, plans and numbers suggest that the company strives to increase its revenue by 16.4 percent from 47.7 billion birr to 55.5 billion birr in the 2020-2021 budget year. The company targets to garner 157 million dollars of revenue from international services. Frehiwot Tamru, CEO of ethio telecom informs the press that the international telecom service including roaming has been adversely affected by the COVID-19 impacts. However, she said the company planned to increase its foreign currency earnings by 6.3 percent despite the threats paused by the COVID-19 pandemic. The company earned 147.7 million USD from international services in the 2019-2020 budget year.
ethio telecom plans to increase the number of total subscribers by 13 percent from 46.2 million to 52.12 million. The number of mobile subscribers projected to increase from 44.5 million to 49.7 million, and data and internet from 23.58 million to 27.47 million. The demand for fixed-line phones is dropping but ethio telecom is determined to reverse the trend in 2021 and plans to increase the number of fixed subscribers from 980,000 to 1.09 million. The state-owned monopoly will share these pies with the upcoming private operators. Time will judge the decision of the government.