Liberalizing Ethiopia’s Telecommunications Sector
Frequently Asked Questions
- What does liberalizing the telecoms sector mean?
The concept of “telecommunications liberalization” means introducing competition into the telecoms sector by allowing commercial enterprises to set up new telecoms businesses as long as they comply with government-defined policies, directives, and regulations.
The Ethiopian Communications Authority (ECA) is seeking interest from international telecommunications operators to manage two new telecoms licenses in Ethiopia, which means there will be three operators with licenses to deliver telecommunications services in Ethiopia: Ethio Telecom and two new license holders.
Liberalization of the telecommunications sector should not be confused with the partial-privatization of Ethio Telecom. Issuing these two new licenses is taking place simultaneously, in addition to the partial-privatization of Ethio Telecom, which is a separate process. Liberalization of the sector aims to enable Ethiopia to maximize the transformational opportunities presented by the digital economy. Opening of the sector to healthy competition will lead to improved telecommunications services and with the passage of the Communications Service Proclamation (the “CSP” or “Proclamation”) on 12 August 2019, the Ethiopian Government effectively lifted restrictions on the telecommunications sector, allowing local and international telecommunications operators to take part and offer their services in Ethiopia for the first time in the nation’s history.
The Ethiopian Communications Authority (ECA) was established by the CSP as an independent federal government regulatory authority. This Proclamation mandated the ECA to regulate the telecommunications sector and as set out in its objectives, to promote: the development of high quality, efficient, reliable and affordable communications services throughout the nation; a competitive market for the achievement of these goals; both accessibility and the interests of customers. The ECA is also mandated to manage the liberalization process.
- Why is Ethiopia doing this? Why do we need competition?
After careful examination of all the different available options, the Government of Ethiopia reached the decision that liberalizing Ethiopia’s telecoms sector is the best way forward to bring improved connectivity for Ethiopians. Greater competition helps to grow markets and brings with it economic and social benefits. New expertise and more competition will help us develop our telecommunications sector faster so we can embrace e-commerce and digital payments as other countries across Africa and other parts of the world have successfully done.
Introducing competition to the sector will lead to improved service delivery so that Ethiopians now and in the future have reliable, efficient and high-quality telecommunications services leading to a better quality of life. On a national level, opening up Ethiopia’s telecommunications sector to competition and private sector participation will enable us to unlock the transformational power of the digital economy, creating jobs and paving the way for digital services in areas such as health, education and finance.
- Why is this taking place at this moment?
Liberalization of Ethiopia’s telecoms sector is part of the government’s 2019 Home Grown Economic Reform Agenda (“2019 Reform Agenda”), which highlights the role of the private sector in driving sustained growth and creating jobs. Addressing the bottlenecks related to productivity, quality and competitiveness is critical to enable the private sector to fully utilize opportunities available for sustainable development and transformation.
Expansion of Information and Communication Technology (“ICT”) infrastructure across the nation is also specified in the 2019 Reform Agenda as one of the goals of digital transformation and it is particularly important to ensure telecommunications infrastructure and services are distributed fairly and are accessible to all. Reform of the telecoms sector is key to ensuring universal access. The focus on transforming to a digital economy is designed to bring improvements in productivity, efficiency, transparency, and accountability.
On 17 June 2020, the Council of Ministers approved the Digital Transformation Strategy, which is aligned with the 2019 Reform Agenda. Central to a digital economy is a world class telecommunications service.
The process of planning for the issuance of the new licenses has been the ECA’s focus for nearly one year. Between 22 October 2019 and 22 November 2019, the ECA held a public consultation on the new regulatory framework which yielded helpful contributions to the ECA’s efforts to issue several draft directives that aim to guide the regulatory process and ensure that telecommunications services are provided to the people of Ethiopia in a manner consistent with the objectives of the CSP. The directives, issued for stakeholder consultation in both English and Amharic languages, have elicited helpful comments both from stakeholders and the public that will guide in the formulation of the final draft directives. The ECA recognizes the paramount importance of establishing a clear, consistent, fair and transparent regulatory environment for the success of the liberalization reforms.
In May 2020, the ECA invited companies to submit their Expressions of Interest (EOI) to take part in this process. We received twelve EOIs, nine from telecoms operators, two from non-telecoms operators and one incomplete submission.
The next step will be to publish the Request for Proposals (RFP) where interested and qualified companies submit their technical and financial bids. We will make a public announcement when the RFP is published, the details of which will be available in the news section of our website.
- How will more competition in the telecoms sector benefit me as a consumer and the country in general?
Opening up the sector to competition has many benefits for consumers. These will include faster, more reliable data and phone services, with better reach across the country than is currently available. With three telecoms operators (Ethio Telecom and the two new license holders) citizens and businesses will have more choice over which company offers them the best service for their particular needs. Improved connectivity will mean consumers are better placed to benefit from the huge opportunities presented by the digital economy.
Improved connectivity and developing ICT usage can increase the efficiency and effectiveness of government and public services, including better governance practices and efficient use of resources.
Additional benefits include:
- More control over personal finances through digital banking and digital payments
- Improved healthcare with more health education available online and doctor patient consultations possible over the internet or mobile phone; improved access to health services, especially in less populated areas, by enabling the use of micro-health coverage for emergency services
- Better access to quality education with learning and materials accessible online via phone or computer
- Broader consumer choice for goods and services and more convenient shopping experiences and options such as food delivery and movie streaming
- Expanding digital financial inclusion services to low-income households will help reduce poverty, in giving opportunities to women and young people, and increasing their participation in the economy by inducing a saving culture. Better sharing of information brought about by improved connectivity can also help to develop small and micro enterprises
- Increased use of ICT can also assist in the expansion of clean energy investments, reducing air pollution
All of these developments and more will lead to the creation of significant employment opportunities in the digital economy.
- How will greater competition benefit my business?
Faster, more reliable connectivity will provide a significant boost to sectors such as manufacturing, tourism, agribusiness, e-commerce and the start-up ecosystem. Businesses will be able to develop their business models faster and operate more efficiently, providing a wealth of employment opportunities as these sectors grow. Reliable and accessible communications will attract both local and inward investment, creating further employment. Additional benefits to businesses include:
- More flexible working practices possible for staff, allowing firms to attract the best talent from across the country
- Farmers and agribusiness will be able to access vital real-time information such as livestock tracing, weather data and commodity pricing improving productivity
- Farmers will have better access to online loan services for the purchase of fertilizers and seeds; digital micro-insurance; as well as income saving and market information
- Entrepreneurs and small and medium-sized businesses will be able to reach new customers via online platforms and convert sales more easily with digital payments
- Construction and manufacturing companies will have access to real time project management software ensuring projects and processes are run more efficiently
- Global companies reliant on internet connectivity (such as GPS-operated taxi services, movie streaming, online music and food delivery) will enter the local market, creating new jobs and stimulating local investment.
- Will this bring unfair competition to Ethio Telecom?
Opening up the telecoms market will enable our citizens and businesses to be fully involved in the array of opportunities that a well-functioning digital economy provides, and this is why we are inviting participation from experienced international telecommunications companies to offer their expertise and services alongside that of Ethio Telecom. This critical undertaking is about offering more choice to consumers and businesses; healthy competition helps to develop markets, bringing with it economic and social advantages along with new jobs.
As stated above, the ECA is drafting a legal and regulatory framework that aims to ensure that principles such as fair competition, consumer protection, and universal access are upheld in the public interest. The policies will, among other things, ensure that Ethio Telecom’s infrastructure can be shared on fair and reasonable commercial terms. It is expected that the new operators will enter into infrastructure and facilities sharing arrangements with each other in order to deploy their network coverage quickly and in a cost-efficient way.
- Are you bringing in the private companies (licensees) for the partial privatization of Ethio Telecom?
No, new licensees will not get involved in Ethio Telecom’s partial privatization. Privatization is not within the ECA’s mandate; the responsibility assigned to the ECA in the Proclamation is to oversee the liberalization and licensing process. Through its mandate to boost competition in the sector (in order to provide a better telecommunications service to the people of Ethiopia), the ECA is seeking two telecom business operators with proven expertise to improve the quality of service and to invest in telecommunications infrastructure and services. As stated in other sections of this FAQ, by the conclusion of the liberalization process there will be three telecommunications operators in Ethiopia: the incumbent operator Ethio Telecom, along with the two new, full-service license holders.
- When will we see services improve?
It is expected that the new operators will be awarded their licenses in the first quarter of 2021. Although the specifics of roll out services will be provided in the ECA’s upcoming policies, briefly, the new license holders will be expected to roll out services in dense urban, urban and suburban areas, where just under a quarter of our population lives, within the first year of operation. Services in rural areas are required to be rolled out over the four years that follow. The licenses will be for a 15-year period with the prospect of renewal if all terms and conditions are met.
- Who decides which telecom operator enters our market?
The Ethiopian Communications Authority (ECA) was established on August 12, 2019 through the Communications Service Proclamation No. 1148/2019 (the “CSP” or “Proclamation”) as an independent federal government regulatory authority. The Proclamation mandates the ECA to regulate the telecommunications sector as well as promote: the development of high quality, efficient, reliable and affordable communications services throughout the nation; a competitive market for the achievement of these goals; both accessibility and the interests of consumers. Therefore, the ECA is the entity mandated to award the two new, full-service licenses through a competitive licensing process.
The ECA has appointed and is being advised by a highly experienced team of experts led by the International Finance Corporation (IFC), a member of the World Bank Group, to support the ECA through the process of issuing two new licenses. The independence of the ECA will be guaranteed through the exercise of the powers given to it under the Proclamation.
- Expressions of Interest (EOIs) were received in June 2020. Have any of these been dropped or disqualified by the ECA or Government for the next stage of the license issuance process?
In May 2020, the ECA published a request for Expression of Interest (EOI) and the names of the respondents have since been shared with the public. The ECA received twelve Expressions of Interest from an excellent range of candidates including global companies interested in taking part. Of the twelve EOIs we received, nine are from telecoms operators, two from non-telecoms operators, and regrettably, one incomplete submission. The next step in the liberalization process is for the ECA to finalize a Request for Proposals (RFP) document, which will invite telecoms operators to submit proposals (bids) to take part in Ethiopia’s telecoms market.
Please note that no bids have yet been received for the two new telecommunications licenses, no bids have been dropped, and no EOI candidate has been excluded or disqualified from bidding in response to the upcoming RFP.
- How will the winning bidders be selected?
The new licenses will be awarded to two qualified telecom operators selected through a competitive bidding process according to the CSP. As outlined above, the next step in the liberalization process is for the ECA to finalize the Request for Proposals (RFP) document, which will invite telecoms operators to submit proposals (bids) to take part in Ethiopia’s telecoms market. In responding to the RFP, each bidder will have to comply with strict technical qualification criteria to demonstrate the company has the technical expertise required to manage a license of this size in Ethiopia, in addition to strict financial qualification criteria to show it has the resources to manage a license of this scale.
- Will the process of selection be transparent?
The ECA recognizes the paramount importance of establishing a clear, consistent, fair and transparent regulatory environment for the success of the liberalization reforms. While the Communications Service Proclamation sets the framework for liberalizing the telecommunications sector, the ECA has developed additional Directives that will regulate, in more detail, critical aspects of the sector. In February 2020, the ECA retained consultants to assist with the development of these directives in accordance with international best practices. More information about the directives and the management of the process can be found on our website.
- What will the Government do to ensure access of communication services to all including rural coverage?
The purpose of the liberalization is to encourage healthy competition in this sector and this is expected to drive down costs to the consumer. We know our citizens are also unhappy with the reliability and quality of service they currently receive. It is critical to make sure that more Ethiopians have access to faster, more reliable, accessible data and phone services and that is why we are bringing in strategic partners for growth, with extensive experience in this area. The ECA has responsibility for economic regulation under the Proclamation and this includes Universal Access of communication services to all. The Authority has the power to develop annual objectives for Universal Access to communication services in Ethiopia. This is to enable the largest number of users to have access to telecommunications services, particularly in rural and remote areas of Ethiopia and there is a Universal Access Fund established by the Proclamation that will be used to support universal access to Communication Services in Ethiopia. The amount and source of income for the Universal Access Fund and its manner of administration are to be determined by the Regulation of the Council of Ministers. The draft Regulation was issued for Public Consultation by the ECA on October 11, 2020.
- Who is advising the ECA on this process?
The International Finance Corporation (IFC), member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, has been engaged to advise the ECA throughout this transaction. IFC is highly experienced in bringing together the right experts for a process of this magnitude and has identified and brought onboard the necessary economic, technical, legal, tax and other expertise.
- How is the Covid-19 pandemic affecting the issuance of the new licenses and is now the right time to be doing this?
Yes, this is still the right time. Covid-19 is not only a global health emergency, it is also causing a devastating impact on economies around the world, with governments and businesses of all sizes having to make drastic changes to adapt to the rapidly evolving situation. The priority of our government include battling the virus by saving lives, supporting the nation’s health workers, and containing the spread of the virus through testing, isolation, and promoting precautionary measures throughout the nation. The priority, rightly, of the many telecommunications firms who may be potential bidders for Ethiopia’s two telecoms licenses, is to focus on ensuring the safety and wellbeing of their own employees and in steering their companies through these unprecedented times. The ECA is well positioned to manage this process in a transparent and fair manner and we are working alongside our team of specialist advisors, doing all that is required to prepare the groundwork for a successful licensing round in these unprecedented times.
Effective telecommunications have a vital role to play in disaster and risk management as well as in unlocking the transformational power of the digital economy. Information technology is needed to deliver early warnings and regular public health information updates to citizens, and telecommunications networks to allow for the fast and smooth management of emergency communications. A reliable and accessible telecommunications network would provide tools and technology to assist our health workers in performing their vital duties. We could also keep our healthcare providers safe by enabling more people to work from home and help millions of students to continue their studies through online learning platforms. Introducing competition to the sector through the issuance of two new licenses has never been more important than the current moment.
Effective telecommunications is also core to the recovery of the economy post pandemic and in driving the planned digital transformation forward.