A wave of transformation is sweeping through the telecommunication sector in Ethiopia. It all started with Prime Minister Abiy Ahmed’s reforms, which began in 2018 and allowed international companies to enter the sector.
The entry in Ethiopia of Safaricom, one of Africa’s most profitable telecommunications companies, signaled the dawn of a new era. After securing a highly contested license, Safaricom began up operations in the area earlier this year.
While the license permitted the company to compete against the state-owned monopoly Ethio Telecom, regulatory restrictions prevented it from offering its groundbreaking money-transfer services.
This is set to change, thanks to a bill written by Ethiopia’s central bank that allows foreign businesses like 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.
This industry has a lot of potential. Last year, Ethio Telecom launched Telebirr, a mobile service that drew four million customers in just a few weeks.
With over 58 million members, Ethio Telcom is the first African operator with the most users in a single country.
Safaricom may profit significantly from Ethiopia’s financial services market, given its history of innovation and immersive products. Even Ethiopia’s financial system prohibits the movement of funds from one bank to another.