Civil unrest: MTN may not re-enter Ethiopian telecoms privatisation deal

According to Bloomberg, MTN will not likely resubmit a bid for a license as a result of fear that “the investment risk is starting to outweigh the benefits”
Civil unrest: MTN may be pulling out of the Ethiopian telecoms privatisation deal

The unrelenting civil unrest in Ethiopia may have forced Africa’s biggest telecommunication services provider, MTN to pull out of making a bid for the country’s revived plan to sell a second telecom license to international operators.

According to Bloomberg, MTN will not likely resubmit a bid for a license as a result of fear that “the investment risk is starting to outweigh the benefits”. This is most likely a reference to the possibility of the ongoing civil war in the northern Tigray region to reduce the prospects of the investment.

The company has also declined to comment on the report as the sources indicate that the company is not ready to make its deliberations public.

MTN’s first bid of $600 million to enter Africa’s second-most populous country earlier this year was turned down 2 months ago as Safaricom-led Global Partnership for Ethiopia (GPE) emerged the sole winner of a telecommunications licence to operate in the country.

Peter_Ndegwa_Safaricom

The consortium was led by Safaricom with a 56% stake, includes Japan’s Sumitomo (25%), CDC Group (10%), Vodacom (6%), Vodafone and the UK sovereign investment fund.  The consortium won the new licence after submitting a financial bid to the tune of $850 million

According to an official statement from the Ethiopian Communications Authority (ECA), the consortium will invest over $8 billion in its telecom sector over the next ten years. Other operators including Orange, Etisalat, Telkom SA, and Liquid Telecom pulled out of the bidding process.

MTN is not alone in this box. Winners of the bid, Kenya’s Safaricom and Vodacom have also expressed concerns regarding the country’s mobile money constraints and current unrest. Both companies also said that they were keeping track of the escalating tensions before finalising their bids just months before they were announced as winners.

Other telcos that have indicated that they are keeping an eye on developments around Ethiopia’s telecom sector include French telco, Orange as well as Etisalat.

Operating in times of unrest carries the risk of telecom infrastructure being damaged, the investors have indicated. And, Ethiopia will need about 7,500 to 8,000 new mobile towers to expand services around the country so as to cover about 50% of the nation’s 110 million people who do not have mobile phone subscriptions yet.

Weighing MTN, Safaricom's Chances of Success as Ethiopia Shortlists Six Operators for Two Int'l Licences

Ethiopia’s Tigray is currently in a state of turmoil, brought about by the region’s defiance of Prime Minister Abiy Ahmed’s administration. Tigray’s decision to proceed with elections despite the government’s ban has fuelled tensions in the region.

MTN’s reluctance to enter Ethiopia is consistent with the company’s recent decision to exit tensioned areas. Recall that the company announced its plan to exit Yemen, Afghanistan and Syria, all affected by civil unrest. Analysts have observed that this move has influenced its shareholder’s sentiments for the better.

MTN’s shares have surged 89% this year alone as investors warm to a broader asset-disposal plan. So far, it is the best performer on the FTSE/JSE Africa Top40 Index.


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