(Source: Capacity, by Alan Burkitt-Gray) –
The World Bank has warned the government of Ethiopia not to take measures that hinder the development of telecoms in the country.
It is criticising the restriction of digital financial services to Ethiopian firms and nationals and a ruling limiting investment by independent cell tower companies, obliging the new entrants to use the infrastructure provided by Ethio Telecom.
This “may slow down network roll out, particularly in rural areas”, warns Ousmane Dione (pictured), the World Bank’s country director for Eritrea, Ethiopia, South Sudan and Sudan in a hard-hitting blog published by the bank.
Dione, who has been with the bank for more than 16 years, took on his present role in August 2020, just as the present government of Ethiopia was advancing its plans to licence new operators in the country and to sell a stake in Ethio Telecom.
The World Bank has a key role in this process, points out Dione. The International Finance Corporation (IFC), the private sector arm of the bank, is assisting the Ethiopian Communications Authority (ECA) with the licence awards. “The World Bank itself is supporting the partial privatisation of Ethio Telecom and the strengthening of ECA as an independent sector regulator.”
The ECA has set 5 April as its deadline for bids for the two new licences. A number of companies have said they are interested in either new licences or in stakes in Ethio Telecom. Airtel has said it will not bid.
“The two new operators would compete with Ethio Telecom in mobile communications, internet and other telecom services,” says Dione in his blog.
“Ethiopia is one of the last countries in the world to have retained a state-owned monopoly provider of telecom network and services, a market which is dominated by the private sector in most countries.”
He says: “Opening the market to private sector competition, and foreign investment, is expected to bring lower prices, higher quality of service and more choice for consumers. It will also lay the foundations for Ethiopia’s future digital transformation.”
But while Ethio Telecom has the most to gain from the expansion of the digital economy, “it is also at risk from losing market share if it fails to compete effectively”, he says. The government of Ethiopia appears to be trying to shelter Ethio Telecom from competition, he notes. “This seems to be the motivation behind policy announcements that seek to restrict the operation of digital financial services to Ethiopian firms and nationals. But this may slow down innovation and investment in the market and may actually hinder Ethio Telecom’s own ambitions to attract a strategic investment partner from abroad.”
He suggests that “a better strategy would be to encourage Ethio Telecom to compete on equal terms with the new market entrants in providing mobile money services, without ownership restrictions”.
In the cell tower market, he advises that “Ethio Telecom will need to collaborate as well as compete with the new entrants. But this is best done by allowing for open commercial negotiations in which the new entrants can make rational decisions whether to build their own infrastructure or buy capacity from Ethio Telecom.”
The government’s policies will allow the state company to charge high prices, and that “will end up harming the company”, he says.
“The new operators will be Ethio Telecom’s biggest customers if prices are set fairly, through market competition,” says Dione. “Ethio Telecom has the potential to become a regional powerhouse, but only if it is well-prepared for the competitive environment.”