Ethiopia lost US$500 million on telecom license mobile-money move

Ethiopia’s decision to exclude mobile money from the terms of two new telecom licenses cost the government about $500 million from bid levels, Prime Minister Abiy Ahmed said.

The block imposed to allow the country to build its own expertise in phone-based financial technology will be lifted after about a year, Abiy said at the launch of Telebirr, a mobile-payments service. Ethio Telecom, the state-owned operator, will run Telebirr.

“This decision has cost us a high price,” the prime minister said. “When it was decided to open up the telecom market about two years ago, one of the key areas of contention was the issue of mobile money.”

The government has long been in the process of selling two new telecom licenses -- a policy that’s at the heart of Abiy’s economic-reform plan. The move will open up one of the last major markets yet to welcome international investors, and is intended to trigger a wider privatization program to raise foreign-exchange and boost productivity.

The issue of mobile money has been vital to the progress of the auction. Financial technology is a major revenue and profit driver for African telecom operators, who are filling a gap left by traditional banks and taking advantage of soaring smartphone use.

“Though Ethiopian mobile penetration lags behind peers, investment and lowered prices should lead to strong growth in takeup of mobile services,” Bloomberg Intelligence analyst John Davies said in a note. “The value to international investors depends on agreements with the government and how it chooses to regulate the market.”

Ethiopia has received a license bid from a consortium including Vodafone Group Plc, Vodacom Group Ltd. and Kenya’s Safaricom Ltd. Another offer was made by MTN Group Ltd., Africa’s largest wireless carrier, and China’s Silk Road Fund.

The country is yet to announce the result.