Ethiopia may reverse its telecoms reforms due to security fears

Race heats up for the world’s biggest untapped mobile money market


Ethiopia may reverse its telecoms reforms due to security fears

Having spent years admiring the rise and sustained dominance of Safaricom’s mobile money service M-Pesa in Kenya, Prime Minister Abiy Ahmed‘s government may find itself competing with it for control of Ethiopia’s market.

State-owned Ethio Telecom launched a mobile phone-based financial service earlier this week. It also selling a 45% stake in its equity to foreign investors. The biggest company looking at the stake is France‘s Orange SA, reported Bloomberg News on 14 May. 

Neither of the companies would comment on the report but the French government has confirmed that Ethiopia‘s President Sahle-Work Zewde will attend a dinner hosted by President Emmanuel Macron at the Elysée Palace on 17 May, along with several African leaders and French corporate chiefs. 

Macron’s meeting with the Ethiopian head of state follows weeks of criticism by the European Union of Ethiopia’s military campaign in Tigray which has prompted little but contemptuous dismissals from Addis Ababa. But corporate sources say the Ethiopian government has indicated more flexibility over its economic liberalisation programme as some investors cite security worries across the country (AC Vol 62 No 9, Issayas in for the long haul).

With just over half its 115 million people using mobile phones, Ethiopia is regarded as one of the markets with the greatest potential for expanding mobile money services. 

Some firms in Addis Ababa offer mobile money services but the country’s banking laws hold back the opportunity of developing mass-market operations such as Kenya. Until now, Ethio Telecom has not been permitted a banking licence, allowing it to provide financial services directly.

Now, Ethio Telecom aims to attract 21m users for the service in its first year of operations, rising to 33m in five years. For a country with a population of 115m, of whom fewer than one in five has a bank account, that should be feasible.

Yet the current lack of internet connectivity – only around 15% of Ethiopians are regularly online – is a stumbling block.

This week, Abiy Ahmed has said that the government has lost out on a potential $500m in tender bids from consortia including South Africa‘s MTN, Kenya’s Safaricom, Britain‘s Vodafone, and China‘s Silk Road Fund in order to protect Ethio Telecom’s monopoly in the mobile money market, at least for a year.

Although those companies were named in a list of bidders last month, few details have emerged about the pricing and process. Insiders say that Ethiopian officials need to quell investor concerns about security in Tigray and next month’s planned elections, at least in the short term.

Companies raising those concerns may now have to take seriously the prospect of Orange teaming up with Ethio Telecom to establish a joint monopoly on mobile money services in the country for at least a year. 

Orange has set up its own mobile money services across Francophone Africa. The new entity could sign up tens of millions of subscribers to a high-tech financial service without any prospect of competitors in one of the world’s last telecom frontier countries.

This article has been republished from Africa Confidential, Read the original article here.

Get real time updates directly on you device, subscribe now.

Leave A Reply

Your email address will not be published.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More