Challenge To strengthen the telecom industry and improve its competitiveness, the government of Ethiopia made the landmark decision in 2018 to deregulate and liberalize the telecommunications market by auctioning/awarding two new full-service licenses as well as divestiture of the incumbent state-owned telecommunications operator EthioTel. Through the IFC and World Bank, the GIF is providing funding and technical assistance for transaction advisory services which will be implemented by the IFC.
Solution To strengthen the telecom industry and improve its competitiveness, the government made the landmark decision in 2018 to deregulate and liberalize the telecommunications market by auctioning two new full-service licenses as well as divestiture of the incumbent state-owned telecommunications operator EthioTel. To support the government in achieving this objective, the GIF is providing $3.5 million in funding and technical assistance through a Project Preparation and Structuring Activity (PPSA) reimbursable grant to fund transaction advisory services implemented by IFC. This support spans technical, legal, tax and accounting advice, stakeholder engagement and communications support, as well as project management expertise for the auctioning and award of the two new telecom licenses. The GIF PPSA follows a previous GIF Project Definition Activity (PDA) support implemented by the World Bank’s Digital Development Global Practice, which provided technical advisory services to the government of Ethiopia. This entailed assessing options to transition from a tightly regulated state-owned monopolistic market to a deregulated open competitive market with an independent regulator and multiple operators and service providers. In addition to providing expertise in project structuring, the GIF plays a key coordination role with the World Bank and IFC to ensure the maximization of positive socio-economic outcomes for the government.
Impact Ethiopia’s telecommunications market and wider economy is expected to see significant benefits through increased competition, efficiency, transparency, and lower costs. It will also enhance the flow of information and encourage foreign direct investments into the economy. With this project, the telecom market is expected to experience accelerated growth resulting in enhanced interconnectivity, lower prices, increase in consumer choice and service quality, and thus the promotion of efficient commerce. The government is expected to generate substantial revenues from the sale of the two licenses, and new entrants are expected to invest substantially in network expansion. Coverage and quality of services are also expected to increase materially. Additionally, access to broadband internet services is expected to rise, enabling more businesses to be connected to high-speed internet.