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More Africa NewsEthiopia: Addis Ababa searches for adviser on sale of Ethio Telecom stake

October 11, 2019by myles

Ethiopia presses ahead with privatising world’s largest telecoms monopoly

The monopoly is the crown jewel in a programme that will open the market to foreign investors for the first time

The privatisation of the world’s largest telecoms monopoly has moved a step closer after Ethiopia launched a search for an adviser on the sale of a stake in its national operator. Ethio Telecom, whose 44m subscribers give it the biggest single-country customer base of any operator in Africa, is the crown jewel in a sweeping privatisation programme that will open the nation’s market to foreign investment for the first time.

The transaction adviser, to be appointed this month, will help Addis Ababa structure the process, determine a minimum value and select the right partner, according to Eyob Tolina, the minister leading Ethiopia’s economic liberalisation.

Ethio Telecom, which generated revenues last year of 36bn birr ($1.2bn), had separately appointed KPMG to assist with its own valuation of the business, Mr Eyob said.

While the government has previously signalled only that it would sell a minority stake of up to 49 per cent of Ethio Telecom, Mr Eyob said it now had a specific number in mind and that the adviser would help gauge market sentiment.

International companies including Vodafone, MTN, Orange, Etisalat and Zain have all expressed interest in gaining access to Ethiopia’s fast-growing market.

Telecoms monopolies were once common across the world. The UK and the US each had one until the early 1980s, controlled respectively by British Telecom and AT&T. But with the advent of mobile communications in the past 30 years, most markets have invited competition.

At the same time as selling shares in Ethio Telecom, Addis Ababa plans to issue at least two new telecoms licences to other operators as part of a “synchronised process”.

Mr Eyob added that the government planned to appoint a different adviser to consult on the licensing process as it wanted to create “a Chinese wall” between the two processes.

It has yet to send a request for proposals. He said that Ethiopia planned to announce the winning bidders in both the share sale and the licensing process in March.

Since taking office as prime minister in 2018, Abiy Ahmed has promised a programme of sweeping economic and political reforms, with the liberalisation of the telecoms sector a key component. After years of state-led double-digit growth, Ethiopia’s economic progress has started to stall and a dynamic telecoms sector is now seen by Mr Abiy as vital to driving future growth.

While neighbouring Kenya has built thriving digital payments and ecommerce industries, the lack of competition and foreign expertise in Ethiopia’s telecoms sector has held back development.

In June the government passed the legislation needed to set up a telecoms regulator, a move Mr Eyob said had been well received by potential investors.

“What we hear from the stakeholders is that we have put a solid foundation for the sector,” he said. “We need to create an enabling environment for the operators to thrive but also making sure that the public interest — by that we mean access and affordability — is fully aligned.”

Mr Eyob said the government was committed to running the process as transparently as possible.

“The determination from the leadership, from the prime minister, is to show the world that we can run a very transparent, competitive and fair process and we will deliver that,” he said.

Source: FT.com