Ethiopia's telecoms liberalization makes progress – Omdia

Over the past five years, Ethiopia has made significant progress in liberalizing its telecom market to spur competition and growth and has significantly increased mobile penetration and uptake in 3G and 4G services.

That's according to market research company Omdia's Ethiopia: Service Provider Market Report - 2024 which shows that the country's mobile penetration rate has increased from 36.7% in the first quarter of 2019 to 61.4% in the first quarter of 2024, and that the number of mobile subscriptions has almost doubled over the same period.

Increased investment in network deployment has resulted in the combined market share of 3G and 4G subscriptions growing from 16.6% in early 2019 to 61.3% in early 2024.

"While Ethiopia has recorded significant growth, Omdia believes that the country could record further growth if the government were to fully liberalize the information and communications technology (ICT) market. Awarding more operating licenses and reducing bureaucracies could significantly promote healthy competition, which would accelerate the growth of the market," said the report's author and Omdia senior research analyst for the Middle East and Africa, Danson Njue.

Njue believes the government should also be leading the deployment of full fiber to enable digital transformation in the country.

Related:Safaricom consortium gets Ethiopia license

According to Omdia data, Ethiopia had a population of around 126.5 million in 2023, but only about 2.7% of households had broadband and about 62% had mobile phones. Omdia forecasts that broadband will grow to reach 4.7% of households by 2028, and mobile penetration could grow to 89% by 2028.

Ethiopia's telecoms liberalization

Ethiopia's telecoms liberalization began in June 2018, when the government said it would allow private domestic and foreign investment into the telecoms sector after decades of state control.

In May 2020, the Ethiopian Communications Authority (ECA) launched a request for Expressions of Interest (EOI) for two new nationwide telecommunications service licenses and also planned to sell a minority stake in state-owned Ethio Telecom.

A consortium led by Kenya's 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, and it officially launched its national network in October 2022 in the capital Addis Ababa and ten other cities.

In June 2023, Ethiopia launched a tender for another telecom license with the original deadline for submissions due in September 2023, but the regulator later moved the deadline to October 2023. So far, this license has not yet been issued.

Related:Bigger stake in Ethio Telecom now up for grabs

"The Ethiopian government must accelerate the planned liberalization of the telecom market by issuing the third operating license and partially privatizing Ethio Telecom to promote competition and growth in the market," Njue advised.

"In addition, the government must aim to reduce – if not eliminate – government bureaucracies that may slow the deployment and launch of new services in the market," he added.

The Horn of Africa nation has been planning the partial privatization Ethio Telecom since mid-2018. A tender for a 40% shareholding was launched in June 2021, however, the process stalled in 2022.

In February 2023, the government said it actually planned to sell a 45% stake in the operator with companies like French-headquartered Orange reportedly interested.

However, in November 2023, Orange said it was walking away from a possible deal, saying the conditions did not allow for the rapid deployment of its strategy and "the completion of a project that would create value for the company."

Omdia flagged that Ethiopia recently announced a change of plan for the proposed sale of a minority stake in Ethio Telecom, preferring to divest a 10% stake to local investors through a listing on the new Ethiopian Securities Exchange (ESX) this month.

Ethiopia's 5G outlook

In September 2023, Ethio Telecom launched the country's first commercial 5G network.

Omdia forecasts that, by the end of 2024, 5G will make up just 1.1% of total mobile subscriptions while 3G and 4G combined will account for 69% of total mobile subs.

"Both Ethio Telecom and Safaricom have been undertaking massive network upgrades and expansion with a focus on 3G and 4G, to meet the growing demand for mobile broadband services," Njue said.

(Source: Omdia's Ethiopia: Service Provider Market Report - 2024)

Ethio Telecom's initial 5G service had 145 sites in the capital Addis Ababa. However, the operator has since expanded the 5G network coverage across several cities and towns in Ethiopia.

"Despite the increased 5G coverage by Ethio Telecom, lack of affordable 5G devices remains the main challenge to increased uptake of 5G service in the country. However, the operator is increasingly seeking partnerships with device manufacturers to address this challenge," Njue added.

Omdia projects that 3G and 4G subscriptions combined will account for 83% of total mobile subscriptions in Ethiopia by 2029, while 5G will account for 9.1%.

Investment focus

Omdia believes Ethiopia needs to focus its investment toward 4G, 5G, fixed wireless access (FWA) and fiber network expansion.

While there has been significant development in broadband network deployment, Ethiopia still scores poorly in the region when it comes to broadband penetration.

The report suggests that network operators should focus on expanding their network coverage beyond urban areas to increase service uptake, while enhancing the network capacity to support high-bandwidth broadband applications for home and office users.

When it comes to pricing, Njue believes service providers should focus on increasing broadband service affordability by offering lower prices and bundling services to promote service adoption and usage.

In addition, they should focus on increasing smartphone penetration by promoting device affordability and availability.

Strong outlook for Ethiopia

Omdia forecasts that Ethiopia's mobile service revenue will grow by 74% between 2024 and 2029, with data revenue growing threefold over the same period.

Mobile subscriptions are predicted to grow by 35% to 112.7 million on the back of increased competition in the market from Safaricom Ethiopia.

"Ethio Telecom will maintain the market lead with a 78.5% market share, compared with 94.2% in 2024. The decline will be due to the impact of Safaricom Ethiopia in promoting competition and growth in the country's mobile market," the Omdia report said.

Meanwhile, fixed broadband subscriptions will grow by 63% to 1.3 million in 2029, with strong growth coming from the FWA and fiber segments.

However, Omdia believes digital subscriber line (xDSL) services will remain the country's dominant fixed broadband technology, with a subscriptions market share of 80% by 2028.

Fiber will emerge as the fastest-growing fixed broadband technology in Ethiopia, with subscriptions increasing sixfold by 2028.

Competition in the market is also expected to heighten following the publication of new mobile and fixed call and SMS termination rates by the ECA in April 2024.