CHALLENGE

Ethiopia is one of the last three countries in the world (along with Eritrea and Djibouti) to retain a national telecom monopoly on all telecommunications services. This has stifled innovation, restricted network expansion, and limited the quality and scope of services for people, resulting in low subscription and penetration rates below the region’s average. For example, as of 2020, it is estimated that only 45 out of every 100 people have a mobile phone in Ethiopia. Those that have them often experience service quality issues, especially in rural areas. In comparison, in Sub-Saharan Africa, the average was 82 per 100 people in 2018. Despite heavy investment in recent years with the installation of fiber optic networks across the country, as well as upgrading mobile communications to third-generation (3G) and fourth-generation (4G) networks, the sector and wider economy have not reaped the potential benefits.  

SOLUTION

To support the government in achieving its objective to strengthen the telecom industry and improve its competitiveness, the GIF provides $3.5 million in funding and technical assistance through a Project Preparation and Structuring Activity (PPSA) reimbursable grant 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 two new telecom licenses.  In May 2021, the Ministry of Finance, Ethiopia and the Ethiopian Communications Authority announced the award of one new telecommunications license to the Global Partnership for Ethiopia/Vodacom Consortium comprising of Safaricom PLC, Vodafone, Vodacom, CDC Group plc, Sumitomo Mitsui Banking Corporation, and U.S. International Development Finance Corporation for US$850million. The IFC and GIF continue to support the government with preparation activities for the subsequent license award expected in 2022.

The GIF PPSA follows a previous GIF Project Definition Activity (PDA) support that was conducted with co-financing from the Public-Private Infrastructure Advisory Facility (PPIAF) and 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. 

EXPECTED IMPACT

Ethiopia’s telecommunications market and the wider economy are 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, increased consumer choice and service quality, and 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.