Ethiopia’s fast growing incumbent will list on Ethiopia’s new stock market this week, selling a 10% stake as part of privatisation efforts
State-owned Ethio Telecom is floating a 10% stake to the public on 16 October is part of the government’s broader strategy to increase private participation in state-owned enterprises. A government spokesperson suggested this would be the first step towards the government divesting a further 45% stake in the telecoms provider to investors. A former monopoly with more than 70 million subscribers is an attractive proposition for big telco groups but also comes with risk.
As long ago as 2021, Orange had been stalking the carrier to the point of lodging an expression of interest. However, in November 2023 the telco announced it had withdrawn from the process to purchase an up to 45% stake, stating at the time “the conditions do not allow for the rapid deployment of our strategy and the completion of a project that would create value for the company.”
Regardless, the Ethiopian government’s strategic investment arm Ethiopia Investment Holdings CEO Brook Taye told Reuters he thinks the country is still a “three-operator market, especially when you add the B2B and B2C sector, and broadband services to houses and offices. It’s a huge opportunity.”
He added the government was “still very much interested, and welcome any interest from operators.” The second operator to arrive in the country was Kenya’s Safaricom but the third operator arrival has been a mirage with many false starts. However, Brook said the government was open to relaunching the tendering process for a second private telecoms licence.
Interestingly, while the Ethiopian Securities Market was originally expected to manage the Ethio Telecom sale, the telco has since been granted a broker licence by the Capital Markets Authority of Ethiopia, enabling the company to sell 10% of its stake directly to local investors through its TeleBirr application.
A bright future
Fitch Solutions company BMI believes Ethiopia to be one of Sub-Saharan Africa’s fastest-growing markets for digital transformation, particularly given its proximity to East Africa’s principal submarine cable hub, Djibouti. The company recently reviewed the telco and believes its modernisation and expansion plans for the 2024/25 financial year were “ambitious”.
These include accelerating its copper network withdrawal programme and connecting 100,000 fixed-line customers with last-mile fibre (FTTx), expanding the reach of its mobile money service to 55 million subscribers and establishing a hyperscale data centre capable of supporting enterprise-grade artificial intelligence (AI)-powered applications and solutions.
The plan to migrate 60,000 Addis Ababa and 40,000 regional fixed-line customers to fibre will be supplemented by efforts to increase long-distance transmission routes as well as backhauling channels to support metropolitan and business centre renovation projects being pursued by the government. BMI has forecast that total FTTx connections will reach 433,700 by the end of 2033, representing just 21.6% of the country’s 2 million fixed broadband connections at that time. In the meantime fixed wireless access will become increasingly important, particularly as consumer spending power is low.
Ethio Telecom plans to increase the country’s data centre load capacity from 4.2MW to 7MW and is reportedly working with Shandong Hi-Speed Group to co-finance the construction of a hyperscale data centre in Abbis Ababa. BMI forecasts that cloud solution spending in Ethiopia will rise from $218m in 2023 to $1.1bn by 2030, for a CAGR of 24.1%. This would make Ethiopia the fourth largest cloud market in Sub-Saharan Africa, behind South Africa and Nigeria and close behind Kenya.
Mobile money strength
The fact the telco is using its TeleBirr service to sell shares demonstrates its strength in attracting mobile subscribers. Competitor Safaricom however will make an impact here given its pedigree in East African mobile money. Ethio Telecom plans to increase the number of TeleBirr agents by 28% to 275,000 and to grow its TeleBirr merchant base by 102% to 367,000. The operator is also expanding the app’s features – the ultimate aim is to expand its TeleBirr subscriber base by 16% to 55 million.
BMI created a 10-year forecast for mobile money services. “The national bank of Ethiopia notes that there were 68.7m registered mobile money accounts as of June 2023, up from 43.3m in June 2022 and 15.3m in June 2021. We forecast the number of accounts to reach 88.5m by the end of 2024 and to grow robustly through to 2033, when there will be 118.9m registered accounts (94.5% of the total mobile subscriber base),” it stated.
Pictured: Ethio Telecom chief executive officer Frehiwot Tamru