There is a wave of transformation sweeping across the telecommunications sector in Ethiopia. It started with reforms effected by Prime Minister Abiy Ahmed starting 2018, part of which have allowed entry of foreign investors into the sector.
The entry of Safaricom, one of Africa’s most profitable telecommunications companies into Ethiopia was the beginning of a new dawn. Safaricom set shop in the country earlier this year after securing a much-hunted license.
While the license allowed the company to compete against state monopoly Ethio Telecom, it couldn’t offer its revolutionary money-remittance services due to legal limitations.
This is about to change after Ethiopia’s central bank drafted a Bill that opens the door for foreign investors such as Safaricom to offer mobile money services.
The government-backed bill states: “Foreign nationals may be allowed to invest in a payment instrument issuer or a payment system operator business, or establish a subsidiary which shall be licensed as a payment instrument issuer or payment system operator.”
Safaricom joined efforts with Vodafone, Vodacom, Japan’s Sumitomo Corp and UK’s CDC Group to secure the licence at a cost of 850 million (Sh97.9 billion).
The move by Ethiopia to flex its Telkom market gives investors access to a population of over 110 million people. The country had one of the most rigid telecom laws in the world which has led to a slow growth in the industry.
“So far, there is no law that enables foreign operators like M-Pesa to acquire a licence in Ethiopia. If the new amendment is approved, it will allow M-Pesa to get a licence in Ethiopia,” Marta Hailemariam, the head of payment settlement at National Bank of Ethiopia (NBE) says.
The potential of this industry is evident. Last year, Ethio Telecom launched a mobile service called Telebirr that attracted four million users in just a matter of weeks. Ethio Telcom has over 58 million subscribers, making it the only African operator with the highest number of subscribers in one county.
With Safaricom’s tradition of innovation and experiential products, it could reap big from the financial service industry in Ethiopia. Even the banking system in Ethiopia doesn’t’ allow the transfer of funds from one bank to another.