Ethiopia: $1.6bn telecom infrasturcutre development project, money well spent?

Ethiopia is one of the last few countries in the world to retain state monopoly over the telecoms sector. So far, this nation of 80m people has poor and restricted mobile coverage. However, as Kaleyesus Bekele reports from Addis Ababa, a billion-dollar project is being rolled out to expand and upgrade services.

The Ethiopian government has embarked on a massive telecom infrastructure development project worth $1.6bn. The Ethiopian state telecom monopoly, Ethio Telecom, announced that the two-year expansion project is part of the Ethiopian development blueprint, Growth and Transformation Plan (GTP), aimed at elevating the country to middle-income level. The new project is designed to boost the country’s mobile subscribers to the 50m mark from the existing 22m.

After year-long negotiations, Ethio Telecom awarded the $1.6bn expansion project to two Chinese telecom giants – Huawei and ZTE – in August.

Each company will receive $800m worth of the contract. The two companies have been competing neck and neck to win the lucrative contract for the past 12 months. The main objectives of the project are to increase telecom service access and coverage across the nation as well as to upgrade the existing network to new technologies.

According to Ethio Telecom, the expansion project would enable it to increase the mobile service capacity to 50m subscribers and to provide Addis Ababa city with fourth-generation (4G) service as well enable the 3G service across the country. Through this project, Ethio Telecom will increase its overall network coverage to 85% across the country.

The contractors are expected to thoroughly upgrade the system and provide all the support services and infrastructure needed. In addition to providing greater mobile service access, the project will incorporate core networks, power supply and network backhaul, increase transmission and fibre-optics capacity and employ the latest technology.

The project will also focus on the delivery and management of internet services including customer billing and customer relations management systems, next generation call centres, security operation centres, telecom fraud management, video surveillance, operation support centres and multi value-added services. According to officials of Ethio Telecom, the two Chinese companies will split the work equally, with each concentrating on what it is best at. For example, Huawei is expected to handle the bulk of customer-related services while ZTE will take on most of the security and operations aspects.

According to Debretsion Gebremichael, the Communication and Information Technology Minister, both firms will provide low-interest loans to Ethiopia through vendor financing.

Andualem Admassie, acting CEO of Ethio Telecom, said,“The expansion is vital to attain Ethio Telecom’s objective of increasing telecom service access and coverage across the nation, as well as to upgrade the existing network to new technology.”

Ethio Telecom is the only mobile operator in the country of more than 80m people, one of the last remaining countries on the continent to maintain a state monopoly in the telecom industry.

However, the government last year gave approval for private companies to provide value-added services – all services other than standard voice calls. The Ministry of Communications and Information Technology said it has received applications from more than 200 firms to provide such services.
South Africa’s MTN Group, Africa’s largest mobile phone company, has already been granted a licence. The government has repeatedly expressed its firm stance not to liberalise the telecom sector in the near future.

Industry experts, however, say the government will eventually be forced to liberalise the sector as it has already applied to join the WTO. “You can’t think of joining the WTO while you keeping your telecom sector closed,” said an Addis Ababa businessman.