Even though Ethiopia has rekindled plans to sell a second telecommunications license to international operators, sources say the MTN Group is not likely to rebid for the license due to foreseeable risks.
Bloomberg quoted reliable sources as saying the ongoing civil war in the northern Ethiopian province of Tigray as the main reason MTN has lost interest in the license, even though the Ethiopia government has adjusted the license to include mobile financial services as earlier requested by MTN.
Africa’s second most populous country offered the two licenses but excluded mobile money, and the MTN Group offered US$600 million for one, but their bid fell short of what the Ethiopia government expected, as a Vodafone/Vodacom/Safaricom consortium paid some US$850 million for one.
MTN had said it was only going to up its offer if mobile money was included in the license, but the Ethiopian government insisted it needed to understand the space properly before allowing international operators in there.
However, the Ethiopian government has now adjusted the terms of the auction to include mobile money, but sources close to the transaction have told Bloomberg MTN sees the investment risk starting to outweigh the benefits.
Risk
The sources said developments such as Ethiopia’s ongoing civil war in the northern Tigray region have made entering the country less attractive for MTN. Tensions around the filling of a giant dam on the Nile are also a concern, they said, due to the increased threat of conflict with downstream nations Egypt and Sudan.
“Operating in times of unrest carries the risk of telecom infrastructure being damaged,” the source said.
Ethiopia will need about 7,500 to 8,000 new mobile towers to expand services around the country as less than half of nation’s 110 million people have mobile phone subscriptions, so improving services and adding customers will require significant investment.
But the source noted that MTN hasn’t finalized its plans yet, and are still examining the situation, adding that there’s also the possibility that another company will see a bid as more viable, especially as Ethiopia is now including the opportunity to offer mobile financial services from the outset.
MTN has however declined to make any official comment on the matter.
Ethiopia’s Minister for Finance, Eyob Tekalign did not also immediately respond to a phone call and text message seeking comment.
Background
Ethiopia awarded one license to a consortium led by Vodacom Group unit Safaricom in May, after accepting an offer of about $850 million and a commitment to invest 10 times that amount over the next decade.
The government has also put a minority stake in state firm Ethio Telecom up for sale alongside sugar assets, part of a privatization plan to raise funds for debt repayments and to boost the economy.
“The Ethiopian Communications Authority wishes to inform all interested telecoms operators to consider this attractive multinational investment opportunity and to remain tuned for additional information by the authority on the launch date of the bid process,” the regulator said in a statement.
The Horn of Africa country is in the process of selling a 40% stake in Ethio Telecom. France’s Orange has shown an interest, having previously held a management contract with the firm in the early part of last decade.
