Ethio Telecom takes its first steps towards privatisation this week, with the government selling a 10% stake in the state-owned incumbent. While Ethiopia does have public companies, buying shares had previously been available only over the counter.
The comes as part of a push by Prime Minister Abiy Ahmed to open Ethiopia up to greater private investment. It is also the first step towards a further divestment of a further 45% in the operator to foreign investors, with the 10% stake being offered domestically to Ethiopians. This would transfer Ethiotel from state-owned to majority private ownership.
"This is something that we have to look into after the 10% sale, because that will give us a sense of valuation," Brook Taye, CEO of parent company Ethiopia Investment Holdings, told Reuters.
A share price has been set of 300 birr (US$2.54) for the 100 million shares it plans to sell. However, there has been some confusion from media outlets as the new Ethiopian Securities Exchange (ESX) is not launching in unison with the listing of Ethio Telecom, with a date for launch not yet scheduled.
CEO of ESX Tilahun Esmael Kassahun explained that "once investors fully subscribe to Ethio Telecom's publicly offered shares, they will be listed on the Exchange for secondary market trading,". “This approach aligns with global best practices and ensures investors have a regulated and efficient platform for buying and selling securities after the IPO."
Towercos still skeptical of Ethiopia
Ethiopia has been a market of great interest for the tower industry for some time. The country has promising demographics and macroeconomics, despite congoing geopolitical instability, with a large population that is growing quickly and remains largely unconnected.
This attracted Safaricom, alongside a consortium of investors including Vodacom and Sumitomo, to acquire Ethiopia’s 2nd operator license and launch operations in 2021 to drive competition in the previously monopolised telco market.
After three years of operations, Safaricom Ethiopia has deployed around 3,000 towers, but faces a huge capex and opex burden managing both tower and power infrastructure. The operator was hoping to see more colocation with Ethiotel on existing sites, and the implementation of a much-anticipated towerco license as no such framework currently exists.
Safaricom has expressed its desire to see a towerco enter the market to support their infrastructure needs, but the government has been focused on achieving two other objectives first; the privatisation of Ethiotel and the licensing of a 3rd operator.
The 10% public sale of Ethiotel shows promising, albeit slow, development. Brook also said that the government was now open to relaunching the tendering process for a second private telecoms license, after the first attempt failed to see any bidders finalise an offer.
"We still think that this is a three-operator market, especially when you add the B2B and B2C sector, and broadband services to houses and offices. It's a huge opportunity so we're still very much interested and welcome any interest from operators."
Ethiopia has only around 10,500 towers to cover 1.1 million square kilometres of land and 133 million people. If the country can sustain 3 healthy private operators, who will all need to quicky expand coverage and capacity, the market will have the necessary conditions to support a robust towerco sector.
Discussions on the Ethiopia Country Spotlight at TowerXchange Meetup Africa focused on the mismatch between the size of the opportunity and government willingness to support the entrance of towercos. While the Ethiotel partial privatisation is promising, Africa’s towercos will hold fire on re-opening their Addis Ababa offices until more concrete steps are taken to licence and welcome towercos.
