TELCO BUSINESS

Safaricom and MTN finalists in Ethiopian market license race

The winners will be announced after technical and financial evaluation is completed

In Summary
  • In a statement, the Ethiopian Communication Authority said it had received two bids, from South Africa's MTN and a consortium including Kenya's Safaricom, for new telecoms operating licenses.
  • The Ethiopian regulator had earlier listed 12 firms last November as among firms that had expressed interest in entering the country’s telecommunications market.
Safaricom house. FILE
Safaricom house. FILE

Safaricom and the ­­­­­­­­­­other applicants will in less than a week know their fate in the bid to enter the Ethiopia market after tendering process concluded Monday.

The Ethiopian Communication Authority (ECA), in a statement said it had received bids, from South Africa's MTN and a consortium including Kenya's Safaricom, for new telecoms operating licenses.

"We will select the winners after technical and financial evaluation is completed," ECA director general Balcha Reba said yesterday.

The Global partnership — which is majority-owned by Safaricom, with Vodacom holding a minority stake submitted an Expression of Interest in June last year but the process has been marred by delays that saw the World Bank intervene, saying the back and forth was delaying the country’s urge to liberalise its communication market.

Safaricom is a leading telco in Kenya, commanding 67 per cent of the market according to latest report by the Communication Authority CA).

The firm  posted a net profit of Sh74.7 billion for the year ending March 31, 2020 representing a 19.5 per cent growth in earnings from 2019.

Early this month, Ethiopia pushed the application deadline from April 5 to April 26, citing requests by bidders to have more time to finalise their offer in light of the Covid-19 market environment. The initial bid submission date was on March 5.

''ECA determined their question to be appropriate and the deadline for submission of bids for the 2 new Telecom Operator Licenses is extended to April 26,'' the statement posted on Twitter read in part. 

The Ethiopian regulator had earlier listed 12 firms last November after they  expressed interest in entering the country’s telecommunications market.

Kenya's telco which is targeting the region for expansion outside East Africa has signed an agreement to borrow up to $500 million (Sh53.5 billion) from America’s sovereign wealth fund US International Development Finance Corporation (DFC) to fund the Ethiopia expansion if successful.

In a notice to shareholders, the telco said it is submitting its proposal through a consortium it is leading with its parent firms Vodafone and Vodacom, British development finance agency CDC Group and Japan's Sumitomo Corporation.

Safaricom is a subsidiary of  Vodacom Group Limited, a South African mobile communications company, providing voice, messaging, data and converged services to over 55 million customers in Africa.

Vodacom's other units includes MTN which operates in several countries including Uganda. The Vodacom group is listed on the Johannesburg stock exchange. It operates under Vodafone, its  parent firm based in the United Kingdom.

The Horn of Africa nation has one of the world’s last closed telecoms markets which is considered the big prize in a push to liberalise the economy.

Liberalisation of Ethiopia’s telecoms sector is part of the government’s 2019 Home Grown Economic Reform Agenda underscores the role of the private sector in driving sustained growth and creating jobs.

The licenses are expected to generate around $1 billion (Sh107billion) in revenue and will have an initial validity of 15 years, with options for renewal.

The beneficiaries of the licenses will be required to commit to reasonable pricing structures as well as meeting agreed-on coverage quotas for geographies, population, universal access and teledensity.

The government is planning to sell 45 per cent stake in the country's telecommunication sector and retain 55 per cent. 

According to ECA, 40 per cent will be given to all interested international bidders and five per cent dedicated to Ethiopians.

The news on tender submissions saw Safaricom's share at the Nairobi Securities Exchange (NSE) rally, gaining Sh0.50 to trade at Sh39 from Sh38.50 on Friday