Ethiopia has granted a new telecommunications license to a consortium led by Vodafone Group Plc of the United Kingdom, paving the way for the sector’s long-awaited opening to foreign investors.
According to Brook Taye, a senior adviser at the Ministry of Finance, the government has also canceled the sale of a second new permit, but will invite fresh bids from international wireless carriers after some policy changes.
He said from Addis Ababa that the winners — Vodafone, Vodacom Group Ltd., in which the British carrier owns a majority stake, and Nairobi-based Safaricom Ltd. — will invest $8.5 billion in their networks over the next ten years, including the license fee. CDC Group Plc and Sumitomo Corp. are among the others.
“With over $8 billion total investment, this will be the single largest foreign direct investment into Ethiopia to date,” Prime Minister Abiy Ahmed said on Twitter.
Two offers had been made to the government of the Horn of Africa country. According to the prime minister, a consortium led by Safaricom submitted a bid of $850 million. The other was a $600 million deal with MTN Group Ltd., Vodacom’s Johannesburg rival, and partners including the Silk Road Fund, a Chinese state investment group.
“The company will enter a commitment of creating 1.1 million jobs in 10 years and cover the country with a 4G service by 2023,” Taye said.
The decision to liberalize the telecommunications sector was made in mid-2018 and is seen as critical to Ethiopia’s economic reform efforts. However, several setbacks have occurred, including the coronavirus pandemic, postponed elections, and the legislative uncertainty associated with the transaction.
The business case for phone companies seemed simple at first: Ethiopia has a population of more than 110 million people, making it Africa’s second-largest, but fewer than half of its citizens have cell phone subscriptions. However, certain auction conditions, such as the requirement to use state-owned telecom towers and an initial ban on issuing mobile-money licenses, weakened the proposition.
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