Faster, cheaper: How ending the government monopoly improved Ethiopia’s internet (2024)

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Africa’s second-most populous nation ended its telecomms monopoly in 2022. Businesses are already seeing the benefits.

Faster, cheaper: How ending the government monopoly improved Ethiopia’s internet (1)

The telecommunications industry in Ethiopia, Africa’s second-most populous country, was a monopoly of the state-owned Ethio Telecom until late last year. For the country’s nearly 30 million internet users — just 25% of the total population — this monopoly meant poor connectivity at high costs and low-quality support services. In 2022, the Ethiopian government opened the market to global private telecomms companies, and less than six months later, local entrepreneurs have already started seeing the benefits of this shift.

In October 2022, Kenyan telecomms giant Safaricom launched services in Ethiopia as part of a consortium including Vodafone, Vodacom, Sumitomo Corporation, and British International Investment. The consortium paid $850 million as a license fee to operate in Ethiopia and has plans to invest another $8 billion over the next decade, making this the single largest foreign direct investment in the country.

Five business owners and several industry experts told Rest of World that Safaricom’s entry has not only given them the option to choose between two competing players but also forced the incumbent Ethio Telecom to improve its services and pricing.

Alamin Yasin, a director at Technolab Digital Service, a group of companies providing digital products and services, told Rest of World he can now subscribe to unlimited mobile internet from Ethio Telecom for 999 birr (around $19) per month. Five years ago, unlimited mobile internet would cost him around $100 a month.

“Even before the opening up of the sector, the incumbent has to have their game on,” Ethiopian serial entrepreneur and investor Addis Alemayehou told Rest of World. “They have to improve their service, lower their prices, improve their customer service.” For the country’s startups, poor connectivity and high internet costs have been two major challenges, Alemayehou said. “A monopoly is never good for business.” “Liberalization is long overdue,” Sossina Tafari, a telecommunications expert focused on Ethiopia, told Rest of World. “Having competition in the Ethiopian space, given its population size, is really required if growth is expected.”

Safaricom has deployed “probably one of the most modern networks in the world in Ethiopia,” Anwar Soussa, CEO of Safaricom Ethiopia, told Rest of World. “Once you start putting 4G in small towns, I think that that’s what’s going to become a relative game-changer for a lot of people, consumers, and businesses.”

Safaricom now has 2.5 million subscribers in Ethiopia and covers 27 cities, according to Abhinav Sinha, managing director and head of technology and telecomms for British International Investment, which is part of the Safaricom consortium.

Some business owners told Rest of World they believe Safaricom does not meet all their requirements yet. For instance, the company doesn’t offer an unlimited data package.“ Safaricom is nowhere near making offers that businesses need, but having them enter the market made Ethio Telecom offer better service,” Ibrahim Ghazali, founder and managing director of Yegara Host, one of Ethiopia’s most prominent startups, told Rest of World. Safaricom’s pricing strategy is to be in line with Ethio Telecom or at a slight premium, according to the company’s chief executive, Peter Ndegwa.

The Ethiopian government has delayed approving Safaricom’s launch of its mobile money transfer service M-Pesa, which has been wildly successful across East Africa. The government wants the telecomms consortium to pay a $150 million licensing fee. “We are ready to launch now,” Sinha of British International Investment said. “The software is ready. The servers are ready. And once we get clarity on that, we’ll start. We won’t be the first [mobile money service], but we hope to be a better one.”

Meanwhile, Ethio Telecom has been running its mobile money service, Telebirr, since 2021. Although it counts 27.2 million users, the actual number of active users is difficult to estimate as some only subscribe to get the free 15 birr offered on registration, according to Atnafu Brhane, co-founder and program director at the Center for Advancement of Rights and Democracy.

Brhane told Rest of World he is concerned about the future of private players in Ethiopia’s telecomms sector due to the country’s corrupt bureaucracy. “The country is not business-friendly,” Brhane said. “Even getting a business license is a big hassle, and the corruption is getting out of control in the past one [or] two years. You won’t get any kind of service without giving money to some officers in government.”

The Ethiopian government has repeatedly shut down the internet during moments of political tension, and the conflict-ridden Tigray region has experienced one of the world’s longest internet blackouts. Internet shutdowns cost the Ethiopian economy some $8.3 million a day, according to the Center for Advancement of Rights and Democracy.

“About three or four years ago, [the startup community] had to basically pack up and move to Kenya or Dubai in order to keep operations up and running. We haven’t had that happen in quite some time, so that’s a positive sign,” Alemayehou said.

The government plans to announce its selection of a third telecomms operator this year. It is also reportedly looking to sell 45% of its stake in Ethio Telecom, which currently has around 70 million customers.

Faster, cheaper: How ending the government monopoly improved Ethiopia’s internet (2024)
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