The block imposed will be lifted after about a year, Abiy said at the launch of Telebirr, a mobile-payments service. “This decision has cost us a high price. When it was decided to open up the telecom market about two years ago, one of the key areas of contention was the issue of mobile money.” (Photo: @ethiotelecom)
Ethiopia’s decision to exclude mobile money from the terms of two new telecom licenses cost the government about $500 million from bid levels, Prime Minister Abiy Ahmed said.
The block imposed to allow the country to build its own expertise in phone-based financial technology will be lifted after about a year, Abiy said at the launch of Telebirr, a mobile-payments service. Ethio Telecom, the state-owned operator, will run Telebirr.
“This decision has cost us a high price,” the prime minister said. “When it was decided to open up the telecom market about two years ago, one of the key areas of contention was the issue of mobile money.”
The government has long been in the process of selling two new telecom licenses — a policy that’s at the heart of Abiy’s economic-reform plan. The move will open up one of the last major markets yet to welcome international investors, and is intended to trigger a wider privatization program to raise foreign-exchange and boost productivity.
The issue of mobile money has been vital to the progress of the auction. Financial technology is a major revenue and profit driver for African telecom operators, who are filling a gap left by traditional banks and taking advantage of soaring smartphone use.
“Though Ethiopian mobile penetration lags behind peers, investment and lowered prices should lead to strong growth in takeup of mobile services,” Bloomberg Intelligence analyst John Davies said in a note. “The value to international investors depends on agreements with the government and how it chooses to regulate the market.”
Ethiopia has received a license bid from a consortium including Vodafone Group Plc, Vodacom Group Ltd. and Kenya’s Safaricom Ltd. Another offer was made by MTN Group Ltd., Africa’s largest wireless carrier, and China’s Silk Road Fund.
The country is yet to announce the result.
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UPDATE: Ethiopia’s state telecoms monopoly launches mobile money service
ADDIS ABABA, May 11 (Reuters) – Ethiopia’s sole mobile operator, Ethio Telecom, launched a mobile phone-based financial service on Tuesday, seeking to boost growth by offering cashless transactions.
Mobile financial services have become a significant part of African telecom operators’ businesses since Kenya’s Safaricom pioneered them with M-Pesa in 2007, giving people an alternative to banks.
The new service, telebirr, will mark a shift for Ethiopia, where the banking system is seen as inefficient with 19 commercial banks serving a population of about 115 million.
State-owned Ethio said it would allow users to send and receive money, deposit or take out cash at appointed agents, pay bills to various merchants and receive cash sent from abroad.
The company aims to attract 21 million users for the service in its first year of operations, rising to 33 million in five years, said Chief Executive Frehiwot Tamiru.
About 40% to 50% of Ethiopia’s annual economic output will be transacted on the platform in five years, she said.
Its launch comes as the government prepares to sell a 45% stake in Ethio, part of a broader liberalisation including the auctioning of two new full service telecoms licences.
Only Ethio Telecom will be able to offer mobile financial services for now as foreign operators are currently barred by law from participating.
Prime Minister Abiy Ahmed said at a launch ceremony for telebirr that the government had foregone $500 million by denying bidders for the two licences the right to roll out mobile financial services.
“We expect Ethio Telecom to strive in a way to compensate this,” he said.
The prime minister said, however, that mobile financial services would be opened up to competition after a year.
He said telebirr would help provide formal financial services to those who do not have access to bank accounts.
It will also enhance security by discouraging criminals who target cash, said Mebratu Kassa, a cashier at the Lucky Cafe and Restaurant in the capital Addis Ababa.
“You sometimes don’t know if the note is counterfeited or not,” he said.
Ethio Telecom, which had revenue of 25.57 billion Ethiopian birr ($604 million) in the six months to the end of December 2020, has 50.7 million subscribers.
Apart from the Ethio stake sale, ending one of the world’s last closed telecoms markets, the government is looking more broadly to open up Ethiopia’s economy.
Shares in sugar factories are also being sold and tentative steps towards opening up the financial sector have been taken. ($1 = 42.3188 birr)
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