Ethiopia's ECA cuts mobile termination rates

The Ethiopian Communications Authority (ECA) has cut mobile termination rates (MTR) for the next five years to encourage more competition in the nation's telecommunications industry.

The cutting of MTRs has made it less costly for telcos in the East African country to connect its customer calls.

The move stems from a 2022 interconnection agreement between state-owned telco Ethio Telecom and Safaricom Ethiopia that was mediated by the regulator.

The ECA has cut the rate to 0.23 Ethiopian Birr (US$0.004) per minute from ETB0.31 ($0.005) per minute, a 25.8% reduction.

Effective from May 1, 2024, the new rates will run until April 2025, when a further drop will be made.

The move also follows a cost study done by the regulator called "Determination of Significant Market Power (SMP) and Interconnection Rates." The study was aimed at leveling the playing fields between the country's operators, creating an environment where they can compete fairly.

The ECA said the new termination rates are a price cap, which means that all mobile and fixed telecommunications operators have the freedom to negotiate interconnection rates that are lower.

"By ensuring that rates are set based on the costs of providing services, the intention is to promote competition among operators, prevent anti-competitive behavior, and encourage a market structure that benefits consumers by offering them a variety of choices and competitive prices," the regulator added.

Ethiopia's mobile market liberalization

Ethiopia is Africa's second most populous nation, and its telecommunications industry has been making headlines in recent years.

Moreover, it will be interesting to see how cutting MTRs for the next five years will impact the country's two telcos, Safaricom and state-owned Ethio Telecom.

Effective from May 1, 2024, the new rates will run until April 2025, when a further drop will occur. (Source: Freepik)

Back in 2018, the Ethiopian government said it would open the telecom sector to foreign investment and award two new 15-year licenses, as well as sell a minority stake in Ethio Telecom.

However, up until 2021, only Ethio Telecom was offering telecom services in the country.

A consortium led by Kenyan-based Safaricom was awarded a telecoms license in May 2021, ending one of the world's last standing telecom monopolies.

Safaricom Ethiopia began rolling out its network in August 2022 in the city of Dire Dawa in the eastern part of the country. In October 2022, it officially launched its national network in the capital, Addis Ababa, and ten other cities.

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Ethio Telecom has more than 64 million customers in Ethiopia, and Safaricom had 3.4 million customers at the end of the first quarter of 2024, as per statistics from market research company Omdia, a sister company of Connecting Africa.

Ethio Telecom is also looking to sell a 45% stake in its business to an independent investor. However, French operator Orange withdrew its interest in November 2023.

*Top image is of the Ethiopian national flag. (Source: Allexxandar on Freepik.)

— Matshepo Sehloho, Associate Editor, Connecting Africa