Telecoms in Ethiopia: Out of reach

Aug 23, 2013 (The Economist) — ETHIOPIA has Africa’s last big telecoms monopoly. The absence of competition has seen a country of more than 80m lag badly behind the rest of the continent in an industry that has generally burgeoned alongside economic growth. Mobile-phone penetration, which averages 70% of the population elsewhere in Africa, is closer to 25% in Ethiopia. A paltry 2.5% of Ethiopians have access to the internet, compared with 40% in neighbouring Kenya.

Ethiopia’s authoritarian leaders are as keen as any on the economic benefits of modern telecoms but fear the political ramifications; pesky dissidents become even more irritating when wired. That explains a $1.6 billion agreement with China’s two leading telecoms-equipment companies to upgrade its network. The deal with Huawei and ZTE will preserve Ethiopia’s state dominance and further put off the opening up of one of Africa’s largest economies.

It’s China calling

A deal in 2010 between France Telecom and Ethio Telecom was seen in some quarters as a step towards privatisation and competition. It drove down calling costs but appears to have faltered with the recent departure of Bruno Duthoit, the French chief executive. Little further improvement is likely now, says Markos Lemma, a local entrepreneur.

What the government wants from China are cheap loans and more control over its citizens. The new deal will provide soft loans to buy a Chinese-built 4G broadband network for the capital, Addis Ababa, and an expanded 3G network for the rest of the country. A similar deal with the same companies in 2007 expanded Ethiopia’s mobile-phone subscriber base but did little to shorten its digital lag.

Hopes that other companies might get a look in were always optimistic. The prime minister, Hailemariam Desalegn, has dubbed the telecoms industry a “cash cow” needed to pay for a rail link to neighbouring Djibouti. Ethio Telecom delivers more than $300m a year to the state coffers. Customers grumble that its slogan should be “Disconnecting Ethiopia from the future”.

The country is one of the world’s last big untouched telecoms markets. The government could earn as much as $3 billion from auctioning licences. But the powerful security services have routinely objected. The Committee to Protect Journalists, a New York-based free-speech lobby, accuses the government of conducting a “systematic effort to control all forms of communications” after it passed laws imposing prison sentences of up to 15 years on anyone caught bypassing online censors. Yidnek Haile, a student in Addis Ababa, was arrested two years ago for showing customers at an internet café how to make online calls.