Ethiopia shields M-Pesa from licence freezeMonday February 07 2022
The suspension of bidding for a second telecoms operator permit in Ethiopia will not derail the introduction M-Pesa licence in the populous nation, clearing the way for Safaricom #ticker:SCOM to launch the mobile money service this year.
Safaricom licence, which was offered last year, was to be upgraded to include mobile financial service after completing bidding for its second telecoms operator permit.
This was thrown into disarray after Ethiopia suspended bids for a second telecommunication licence.
Dr Eyob Tekalgn Tolina, the State Minister of Ethiopia’s Ministry of Finance, told the Business Daily that it has delinked the M-Pesa permit from the second operator’s licence.
He said Ethiopia will keep its promise to Safaricom to give the Kenyan telco giant an M-Pesa license by May.
“The second operator license is still in the making but we have delayed it because of the current situation we felt we will not get the right competitors now. We have pushed it by a few months,” Dr Tolina said in an interview with the Business Daily.
“That has nothing to do with the financial services license, Safaricom will get that because that was part of the promise we made to give it this year.”
Ethiopia is finalising legal changes to allow the central bank to issue Safaricom with a licence for mobile financial services.
A consortium led by Safaricom secured the first licence, which does not have a permit for mobile financial services like M-Pesa, in May.
The Horn of Africa nation sold only one of two full-service licences on offer in May, citing a lower-than-expected price for the second one, which it now wants to offer again.
It is liberalising its telecoms sector in a bid to pivot to a modern, digital economy in line with reforms unveiled by Prime Minister Abiy Ahmed in 2018.
State monopoly Ethio Telecom, which launched a new mobile financial service called Telebirr in May, snagged 4 million users within weeks, showing the potential of the market.
Ethiopia had one of the world’s closed telecoms markets.
A delay by the Ethiopian Communication Authority (ECA) in issuing the second license had dampened Safaricom’s prospects to launch into the lucrative mobile money market.
“They have been very active and I think they are planning for a launch sometimes in April and so far have kept their momentum in attaining the critical milestones,” Dr Tolina said.
Mobile financial services have become a significant part of African telecoms operators’ businesses since Safaricom pioneered them with M-Pesa in 2007, giving people an alternative to banks.
The Ethiopian government is also preparing to sell a 45 percent stake in Ethio Telecom, part of a broader liberalisation that includes the auctioning of two new full-service telecoms licences.
A monopoly, Ethio Telecom is seen as the biggest prize due to its huge protected market.
Its subscriber base of 50.7 million makes it the biggest single-country customer base of any operator in Africa.
Players like Safaricom are attracted by the growth potential in that market whose 110 million people means the country offers a penetration rate of 46 percent.
By contrast, Kenya’s 52.2 million mobile phone subscribers gives it a penetration of 118 percent.
Mobile money services like M-Pesa have the potential to transform Ethiopia’s economy, as it has done in Kenya, by allowing people to sidestep a rickety and inefficient banking system and send money or make payments at the touch of a phone button.
The ability to access digital banking services is likely to be a game-changer for Ethiopians whose banking sector has no way of transferring funds from one bank to another.
Safaricom is one of several Kenyan firms that have been eyeing the Ethiopian market for years due to the country’s huge population. Ethiopia has kept foreign involvement in the economy at a bare minimum.
However, the country has consistently registered robust economic growth, averaging 10 percent in the past five years, and its ongoing economic reforms look set to strengthen investor sentiment.
Its population, the second-largest in Africa after Nigeria, also offers immense opportunities for business. But the military conflict in the north of the country remains a risk.
Ethio Telecom fell 13.6 percent short of its first-half revenue target, with parts of its network hobbled by the civil strife.
Prime Minister Abiy Ahmed sent troops into the northern Tigray region to fight rebellious Tigrayan forces and the conflict engulfed two neighbouring states during the second half of last year.
Almost 3,500 base transmission stations belonging to the company were damaged during the fighting in the north, rendering them out of service and costing the company 3.67 billion birr (Sh8.33 billion) in lost revenue.