Despite Liberalization, Ethio Telecom Remains “Cash Cow”

Ethiopia’s former ruling party often referred to the country’s telecom sector and Ethio Telecom as a “cash cow.” The late Prime Minister Meles Zenawi was quoted as describing Ethio Telecom as a dairy cow, while his successor, Prime Minister Hailemariam Desalegn, echoed the same message.

During that period, the state-owned telecom monopoly was earning the government hundreds of millions of dollars annually, making a significant contribution to the country’s annual budget. The notion of allowing private corporations to enter this space was met with strong resistance by the government, viewing it as jeopardizing one’s own fortune.

In addition, maintaining state control of telecommunications was considered the preferred model to foster universal access to teleco services.

Hailemariam, in an interview with the Financial Times back in 2013, stated, “This sector is a cash cow, and that’s why the private sector wants to get in there, and they’re trying to tell us all kinds of stories… to get the license.”

At the time of Hailemariam’s statement, Ethio Telecom’s annual revenue stood at around 17 billion birr (400 million dollars).

Now, a decade after this interview, significant changes have occurred. The state monopoly in the Ethiopian telecom sector is in twilight. The opening up of the telecom sector has led to Safaricom Ethiopia becoming the first private telecom operator in Ethiopia, giving Ethio Telecom a run for its money. Furthermore, the tender to issue a third telecom operator license is currently underway.

Despite these changes, one thing remains clear: Ethio Telecom is still a “cash cow”. Recently, Ethio Telecom announced its financial results for the 2015 Ethiopian fiscal year. The company generated a total revenue of 75.8 billion birr (1.3 billion dollars). This is an astonishing 210 million birr in revenue per day.

Additionally, Ethio Telecom revealed that its profit more than doubled to 18.8 billion birr (344 million dollars). The company’s CEO, Frehiwot Tamiru, stated in a news conference that the company’s subscriber base had increased by 8% to 72 million.

Industry observers say the entrance of Safaricom Ethiopia not only brought the single largest Foreign Direct Investment (FDI) to the country but also led to significant improvements in Ethio Telecom’s services.

In 2021, Abiy Ahmed (PhD), the Prime Minister of Ethiopia, spoke to Telecom Review about the challenges faced by the Ethiopian telecom market. He described how the market lacked the necessary capital and expertise to advance its services, leading to multiple issues such as poor quality of service and frequent disruptions.

To address these challenges and boost the sector, the government introduced competition, prompting Ethio Telecom to step up its game. Over the past five years, the company has implemented significant tariff discounts, including up to 65% discount on mobile voice and up to 71% discount on mobile data.

These changes also coincide with the rise of Frehiwot to the helm, replacing Andualem Admassie (PhD). Frehiwot, a fierce and passionate woman, has been tasked with transforming the century-old public company to thrive in the cut-throat competition of the 21st century—an endeavor she has excelled in.

Andualem, on the other hand, is now heading Tele Mobile South Sudan (TMSS), a telecommunications service provider in South Sudan that signed a strategic partnership agreement with Ethio Telecom, further indicating the regional expansion of Ethio Telecom.

Ethio Telecom’s mobile money service, telebirr, has also emerged as a leading player in Ethiopia’s digital financial landscape since its introduction two years ago. Meeting the growing demand for digital financial solutions in the country, telebirr has amassed an impressive user base of 34.3 million subscribers, with the total transaction value on this platform reaching a staggering 679.2 billion birr.

The company’s digital financial services have been a hit, providing a total of 4.1 billion birr in loans to 2.4 million customers.

With these impressive figures preceding the planned 45 percent stake sale of Ethio Telecom, Ethiopia can expect to continue benefiting from its “cash cow.” Bloomberg has reported that French telecoms group Orange and UAE-based e& are considering acquiring the stake.