Steps to reform the telecoms industry in Ethiopia

Steps to reform the telecoms industry in Ethiopia

Telecommunications reforms have been taking place in the whole world. However, Ethiopia is one of the latest countries to have a monopoly on its telecom industry. Ethio Telecom, has been the only telecommunications network operator and provider of telecommunications services. The telecoms industry in Ethiopia has seen growth due to the government investment through a supplier credit loan from The Export-Import (EXIM) Bank of China. And, Ethio telecom’s revenue has seen significant improvement.

According to Statista, Ethio Telecom earned 15.7 billion Ethiopian Birr in profit in the 2018/2019 fiscal year. For years, the government has resisted to national and international pressures aiming for telecom privatization. However, in June 2019, the Ethiopian parliament approved legislation entitled ‘Proclamation for the Regulation of Communications Services’, a serious step into the privatization of Ethio Telecom. The plan would involve the sale of the company shares to foreign and domestic private investors, with the government holding a ‘golden share’ while two new licenses are expected to be offered to two international operators.

The initial plan to issue licenses was set for March 2020. However, the plan was delayed due to parliamentary elections that have been pushed from May to August. On May 21st 2020, foreign telecom operators were invited to express their interest to enter the market being served by Ethio Telecom. The deadline is 12:00 pm Eastern Africa time (GMT+3) June 22nd 2020. Two qualified telecommunications companies are to be selected through a competitive bidding process in accordance with Communications Service Proclamation No. 1148/2019. “As we are a latecomer, we can learn from what others did wrong and right. We reviewed the best and the worst global experiences” avowed  State Minister of Finance Eyob Tekalign Tolina to Reuters.

The Ethiopian Communications Authority ECA was established under the Communications Service Proclamation No.1148/2019. Its scope of regulation covers both Telecommunications Services and Postal Services within Ethiopia. According to Ethiopian Communications Authority ECA, the plan consists of expanding ICT coverage in all parts of the country as well as providing competitive ICT services in terms of cost and quality.

Considered as the second-most-populous nation in Africa after Nigeria, Ethiopia would be a great deal for foreign investors. Transferring telecommunications public monopolies into the hands of private operators have gained the interest of multinational companies such as T-systems in Germany, the French leader in Telecommunications Orange SA, Helios Towers PLC and Safaricom PLC which plans to take on debt to fund a joint bid by a consortium including parent Vodacom Group Limited and two other entities. MTN Group Limited, Airtel Africa Plc, Bharti Airtel Ltd and Abu-Dhabi based Etisalat have also expressed interest.

Some regulations released by Ethiopia’s investment-promotion agency would reserve banking and micro-finance for local investors which would prevent companies like Safaricom from providing services via the M-Pesa payment platform. Regulations will therefore have to change said Safaricom’s interim Chief Executive Officer Michael Joseph, in an interview with Bloomberg. “As Safaricom, we cannot show up in Ethiopia to provide mobile-money services if we have to give it all away to somebody else under some sort of technical support,” he said.

Ethiopian citizens have been suffering from poverty. The ITU ICT Development Index (IDI) of 2017 has ranked Ethiopia at 170th, far below Mali and Rwanda, both have comparative GDP to Ethiopia. The privatization of the telecom sector would facilitate the integration of the country into the global economy.

Reforming the Telecoms industry in Ethiopia would be a game-changer for the general public as well as the economic sector including banking and manufacturing. Internet shutdown in Ethiopia has been affecting businesses in a negative way. NetBlocks has established a new tool that estimates the economic impact on internet disruption, mobile data blackout, or application restriction. The Cost of Shutdown Tool (COST) shows that a total shutdown of the Internet for one day costs Ethiopia around $4,458,472. In 2020, Ethiopia faced a two-month-long shutdown reported Human Rights Watch. This is considered a nightmare for the economy.

Ethiopia has one of the lowest internet rates in Africa and the whole world. Half of the Ethiopian population are youth, they need the internet to communicate and to conduct business. And for a long time, Ethiopians have been suffering from Internet and phone call shortage – a basic human right according to International law. Texting blackouts have been occurring for years. In 2005, widespread protests took place after disrupted elections. In response to the demonstrations, authorities closed the text message service for about two years.

In 2019, text messages service was turned off because four students were caught cheating after sending text messages. Between 2016 and 2017 Internet was shut down to curb the leaking of exam papers. In June 2019, the head of the army and a state president were among five government officials killed in violent attacks. After the assassinations, the government switched off internet access for 10 days. “A measure likely to ring alarm bells for the prospective owners of new telecom licenses” according to Bloomberg.

The lack of competition in the Ethiopian telecom market has restricted investment in network expansion and upgrade, resulting in poor internet services. In addition, prices in Ethiopia are higher than average. Most of the Ethiopian citizens don’t have access to the telecommunications services at all. According to the Ethio Telecom website, the company has 45.6 million customers including 44.04 million as mobile customers, 22.74 million as Data & Internet customers, and 1.01 million as fixed-line customers.

Financing the telecom industry was done for a long time via foreign loans which is considered a burden on Ethiopia. These loans increased Ethiopia’s overall debt which was estimated to be $29 million in 2018. The privatization will reduce the debt and attract foreign investment which will improve consumer choices and will give all citizens equal access to services. Internet and mobile won’t stay as a luxury as the new companies will ensure competitive affordable prices.

On the other hand, this late telecom privatization raises different concerns. If not implemented correctly, it could lead to increased service tariffs or the continuation of the present poor quality of service levels.