ETHIOPIA – The Ethiopian Communications Authority (ECA) has announced that Safaricom Telecommunications Ethiopia PLC has been issued with a final licence even as reports surface that over half of the winning consortium’s financing could be in doubt due to US sanctions.
The ECA awarded the final licence “following the incorporation of the local company and business registration by the Global Partnership for Ethiopia” (GPE Consortium).
The Safaricom-led consortium received a designated licence in May 2021 after winning the bid and was given 45 days to register a local company.
“The ECA has granted a nationwide full-service Unified Telecommunications Service License to the Safaricom Telecommunications Ethiopia PLC effective from 9 July 2021, valid for a term of fifteen years from the effective date, and renewable for additional terms of fifteen years subject to fulfilment of all license obligations,” the ECA said in a press statement.
Three years after the Abiy Ahmed administration announced its plans to liberalise and open up the telecommunications sector to both domestic and foreign investment, the Ethiopian Government formally announced a Safaricom-led consortium had won a new telecommunications licence on 22 May 2021.
Prime Minister Abiy Ahmed said: “With over US$8 billion total investment, this will be the single largest FDI [foreign direct investment] into Ethiopia to date. Our desire to take Ethiopia fully digital is on track. I would like to thank all that have taken part in this and for pulling off a very transparent and effective process.”
Only two consortiums had made formal bids in the auction for the two operating licences.
A number of firms that had expressed interest pulled out of the auction at the last stage: Etisalat, Axian, Orange, Saudi Telecom Company, Telkom South Africa, Liquid Telecom, Snail Mobile, Kandu Global Communications and Electromecha International Projects.
The winning Global Partnership for Ethiopia (GPE) bid was for US$850 million and the consortium consists of Safaricom (55.7%), Japan’s Sumitomo (27.2%), Vodacom (6.2%), and the CDC Group (10.9%).
The latter is a British development finance agency that has also strongly backed Liquid Intelligent Technologies. Telecom with US$180 million in 2018 and US$40 million in 2020 tranches of equity investment.
US Sanctions
The US sanctions may affect progress with the new Ethiopian telecoms licence because one of the main financial backers to the GPE consortium is the US International Development Finance Corporation (DFC) agency.
The DFC made “an up to $500 million loan” to the GPE consortium to “finance the design, development, and operation of a new private mobile network provider and the acquisition of a mobile network provider licence”.
As a result of the sanctions, the DFC’s funding was initially thrown into doubt as US investments in the country were paused.
Those fears were allayed though when Safaricom disclosed the DFC confirmed it had been granted approval to still make select investments in Ethiopia, including the funding for the GPE consortium.
Ethiopia’s newest operator may, however, have been dealt a fresh blow this week over reports the DFC has said that it could still pause or stop its investment following a further escalation of armed conflict.
The Business Daily purportedly received the following DFC statement on the development: “The board approval signified initial DFC willingness to consider a loan to the consortium in the event it wins a licence but does not obligate DFC to move forward with the transaction. DFC is working closely with its partner agencies in the US government to monitor the situation in Tigray and will carefully consider its impact on any potential financing of the Vodafone consortium.”
The news comes after the recent announcement that Anwar Soussa, former MD of Vodacom DRC and chairperson of Vodafone’s African mobile money services Vodacash (M-PESA), had been appointed MD of the GPE consortium.
Soussa, who started his role on 1 July 2021, will report to the GPE board and Safaricom’s CEO Peter Ndegwa and is tasked with leading the Ethiopian operating company, which is expected to start rolling out telephony services from 2022 and put a low Earth orbit satellite in place that will provide nationwide 4G coverage by 2023.
Attaining the final licence now paves the way for the consortium, led by Kenya’s largest telecom operator, to get underway with starting operations in the second most populous African nation.
The consortium is reportedly going to create up to 1.5 million new jobs and bring an investment of US$8.5 billion over the next decade.
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