Ethiopia’s telecoms industry, the largest remaining state monopoly of its kind, was seen as the final frontier for a sector that has underpinned communications, education and healthcare during the pandemic. Addis Ababa viewed the sale of its first two private telecoms licences as the “deal of the century”, and predicted that international bidders would queue up to penetrate a market of 112m people. Ultimately, the process proved disappointing, with just two bids announced at the launch ceremony on 25 April, one by South Africa’s MTN Group in partnership with China’s Silk Road Fund and the other by the Global Partnership for Ethiopia Consortium, which includes Kenya’s Safaricom and international partners Vodafone, Vodacom, CDC Group and Sumitomo. The relative failure of the process is a bitter pill to swallow for Abiy Ahmed, the prime minister who vowed to liberalise Ethiopia’s economy but has become embroiled in a reputation-damaging conflict in the northern region of Tigray. The underwhelming telecoms auction has been blamed on an opaque bidding process and the exclusion of the lucrative mobile money sector, which has since prompted a government U-turn. But it also demonstrates waning investor confidence amid growing insecurity. With Abiy due to face elections delayed from 5 June, some investors are concerned about the potential for further political disruption.
Ethiopia’s economy grew at an annual rate of 9.4% between 2010 and 2020, yet the long-term exclusion of private operators led Ethiopian telecoms to lag far behind developments in Kenya and South Africa. Businesspeople travelling in the country frequently complain about inadequate or non-existent mobile service. In a 2017 UN index, Ethiopia’s telecoms development ranked 170th out of 176 countries. By contrast, all over the continent, improved mobile telecommunications have been boosting productivity and growth. According to GSMA, mobile technology has driven a fifth of income-per-capita growth over the last 20 years in sub-Saharan Africa, and there will be an estimated 1bn mobile connections in the region by 2024. The issuing of the two spectrum licences and the planned sale of a 45% stake in state-owned operator Ethio Telecom this summer were widely seen as a major investment opportunity. GDP growth fell three percentage points to 6.1% in 2020 due to Covid-19, and is expected to slump to 2% in 2021, according to the IMF. Meanwhile, inflation hit 20% in March and Addis Ababa has requested debt restructuring under a G20 scheme to help countries hit hard by the Covid-19 pandemic. The crowning jewel of Abiy’s privatisation drive has underdelivered, hinting at the challenges he faces to untangle a state-run economy while combatting mounting insecurity.