"Ethiopia\u2019s telco licence: \u2018deal of the century\u2019 or flop?"

" \n Ethiopia has awarded a telecommunications licence to a consortium of foreign investors in what the government has repeatedly hailed the \u2018deal of the century.\u2019 As the country struggles with internal stability, external analysts question how pivotal the contract will be. \n \n\n \n The finance ministry and the Ethiopian Communications Authority (ECA) handed the new telecom operating licence to a consortium led by Kenya\u2019s Safaricom on May 22, putting an end to more than a century of state monopoly in the sector. \n \n\n \n The consortium includes UK\u2019s Vodafone and CDC Group, South Africa\u2019s Vodacom and Japan\u2019s Sumitomo Corporation. It will set up a new operating company to start providing services to the 112 million strong market from 2022, Safaricom said in a statement on May 24. \n \n\n \n Safaricom and its partners bid $850m for the licencing fee, senior adviser to the finance ministry, Brook Taye, told the news agency AFP. Overall, they are expected to invest over $8bn over the next 10 years. \u201cThis will be the single largest foreign direct investment (FDI) into Ethiopia to date,\u201d prime minister Abiy Ahmed wrote on Twitter on May 22. \n \n\n \n This commitment \u201cmakes commercial sense,\u201d says Ed Hobey-Hamsher, senior Africa analyst at risk intelligence firm Verisk Maplecroft, but doubts remain over how successful the whole initiative will be.\u00a0 \n \n\n \n \n \n\n \n Not without hiccups \n \n\n \n This deal has been at the crux of Mr Ahmed\u2019s economic liberalisation agenda. \u201cWith the liberalisation of the telecom market through a fair and transparent process, the government enables every Ethiopian to access quality services at an affordable price,\u201d finance minister Ahmed Shide said following the announcement. \n \n\n \n However, the tendering process has been far from frictionless. Despite the hype, the government failed to lure offers from multiple international companies as it originally expected, with Safaricom\u2019s and another bid by South African MTN being the only ones on the table. \n \n\n \n \u201cTelecommunications companies were unnerved by the lack of prior notification they received,\u201d says Mr Hobey-Hamsher. \u201cThe ECA moved the goalposts several times, especially over pricing and the package of services being tendered.\u201d \n \n\n \n The now twice-delayed Ethiopian national elections approaching in June also has the timing of the whole operation raising eyebrows. \n \n\n \n \u201cThe timing of the licence award was almost certainly due to electoral considerations,'' says Mr Hobey-Hamsher. \u201cThe liberalisation of the telecoms sector is central to Mr Ahmed\u2019s economic reform programme, but little demonstrable progress has since been made.\u201d \n \n\n \n Conflict in Tigray \n \n\n \n While this may be a landmark deal for Ethiopia in terms of its unprecedented FDI figures, the tendering process has also been overshadowed by the crisis in the northernmost state of Tigray, where thousands have lost their lives and hundreds of thousands have been displaced. \n \n\n \n It is still too early to assess the degree to which the ongoing conflict will impact FDI into Ethiopia, but these political insecurities, combined with debt challenges and the Covid-19-induced downturn \u201cadd up to a very challenging economic picture for the country\u201d, says William Davison, senior analyst for Ethiopia at the Crisis Group. \u201cGiven the very nature of the political insecurity problems, that will certainly have had an impact on the potential bidders.\u201d \n \n\n \n The country\u2019s political and business environment rank are a matter of concern for investors across the board. The rise of Mr Ahmed to the prime minister post in 2018 was initially met favourably by the international community. \n \n\n \n Greenfield FDI reached a record $6.8bn in 2018, according to data from foreign investment monitor fDi Markets, and Mr Ahmed was awarded the Nobel Peace Prize in 2019 for his initial success in stabilising the country and its multiple ethnic groups. However, things turned sour rapidly, with the conflict in the Tigray region once again bursting out in 2020 and the prime minister burning the political capital accumulated until then. \n \n\n \n \u201cWhat we can say is that there is clearly a direct causal relationship between FDI inflows and political stability in Ethiopia,\u201d explains Mr Hobey-Hamsher. \u201cWe definitely see greater numbers of environmental, social and governance (ESG)-conscious executives querying the overall political trajectory of Ethiopia under Mr Ahmed, and his authority to deliver his promised economic reforms.\u201d \n \n\n \n As the ECA says they plan to re-tender a second license \u2018soon\u2019, the government has a new chance to convince international telecom operators that Ethiopia offers business opportunities without stirring the doubts of their ESG-conscious shareholders. \n "

"Ethiopia\u2019s telco licence: \u2018deal of the century\u2019 or flop?"

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