Safaricom comes to Ethiopia; Ethio Telecom is improving

The telecommunications industry in Ethiopia, Africa’s second most populous country, was until late last year a monopoly of the state-owned Ethio Telecom. For the country’s nearly 30 million internet users – just 25% of the total population – this monopoly meant poor connectivity, high costs and low-quality support services. In 2022, the Ethiopian government opened the market to global private telcos, and less than six months later, local entrepreneurs are already starting to see the benefits of this shift.

In October 2022, Kenyan telecom giant Safaricom launched services in Ethiopia as part of a consortium that includes Vodafone, Vodacom, Sumitomo Corporation and British International Investment. The consortium paid $850 million as a license fee to operate in Ethiopia and plans to invest another $8 billion over the next decade, making this the largest foreign direct investment in the country.

This was told by five business owners and several industry experts The rest of the world that Safaricom’s entry has not only given them a choice between two competing players, but also forced the incumbent Ethio Telecom to improve its services and prices.

Alamin Yasin, a director at Technolab Digital Service, a group of companies that provide digital products and services, said The rest of the world he can now subscribe to unlimited mobile internet from Ethio Telecom for 999 birr (about $19) a month. Three years ago, unlimited mobile internet would have cost him about $100 a month.

“Even before the opening of the sector, the incumbent must have their game on,” said Ethiopian serial entrepreneur and investor Addis Alemayehou The rest of the world. “They need to improve their service, lower their prices, improve their customer service.” For the country’s startups, poor connectivity and high internet costs have been two major challenges, Alemayehou said. “A monopoly is never good for business.” “Liberalization is long overdue,” said Sossina Tafari, a telecommunications expert focusing on Ethiopia. The rest of the world. “Having competition in the Ethiopian space, given its population size, is really required if growth is expected.”

Safaricom has deployed “probably one of the most modern networks in the world in Ethiopia,” said Anwar Soussa, CEO of Safaricom Ethiopia The rest of the world. “When you start putting 4G in small towns, I think that’s what’s going to be a relative game-changer for a lot of people, consumers and businesses.”

Safaricom now has 2.5 million subscribers in Ethiopia and covers 27 cities, according to Abhinav Sinha, managing director and head of technology and telecommunications for British International Investment, which is part of the Safaricom consortium.

Some business owners told The rest of the world they believe that Safaricom does not meet all their requirements yet. For example, the company does not offer an unlimited data package.” Safaricom is not close to coming up with offers that businesses need, but getting them to enter the market made Ethio Telecom offer better service,” Ibrahim Ghazali, founder and CEO of Yegara Host, one of Ethiopia’s most prominent startups, said The rest of the world. Safaricom’s pricing strategy is to be in line with Ethio Telecom or at a slight premium, according to the company’s CEO, Peter Ndegwa.

The Ethiopian government has delayed approving Safaricom’s launch of its mobile money transfer service M-Pesa, which has been very successful across East Africa. The government wants the telecommunications consortium to pay a license fee of $150 million. “We are ready to launch now,” said Sinha of British International Investment. “The software is ready. The servers are ready. And when we get clarity on that, we’ll get started. We won’t be the first (mobile money service), but we hope to be a better one.”

Meanwhile, Ethio Telecom has been running its mobile money service, Telebirr, since 2021. Although it counts 27.2 million users, the actual number of active users is difficult to estimate as some only subscribe to get the free 15 birr offered upon registration, according to Atnafu Brhane, co-founder and program director at the Center for the Promotion of Rights and Democracy.

Brian told The rest of the world he is concerned about the future of private players in Ethiopia’s telecommunications sector due to the country’s corrupt bureaucracy. “The country is not business friendly,” Brhane said. “Even getting a business license is a big hassle and corruption is getting out of control in the last one (or) two years. You won’t get any kind of service without giving money to some officers in the government.”

The Ethiopian government has repeatedly shut down the internet during moments of political tension, and the conflict-ridden Tigray region has experienced one of the world’s longest internet blackouts. Internet shutdowns cost the Ethiopian economy about $8.3 million a day, according to the Center for Advancement of Rights and Democracy.

“About three or four years ago (the startup community) basically had to pack up and move to Kenya or Dubai to keep operations going. That hasn’t happened for a long time, so that’s a positive sign,” Alemayehou said.

The government plans to announce its choice of a third telecoms operator this year. It is also reportedly looking to sell its 45% stake in Ethio Telecom, which currently has around 70 million customers.

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