Ethiopia’s Telecom Revolution: A Five-Year Journey of Liberalization and Growth

Over the past five years, Ethiopia has embarked on a transformative journey to liberalize its telecommunications market, aiming to foster competition, enhance growth, and significantly increase mobile penetration. This ambitious endeavor has led to remarkable advancements in mobile services, particularly in the uptake of 3G and 4G technologies. According to Omdia’s Ethiopia: Service Provider Market Report – 2024, the country has witnessed a surge in mobile penetration, with the rate climbing from 36.7% in early 2019 to an impressive 61.4% by the first quarter of 2024. The number of mobile subscriptions has nearly doubled during this period, highlighting the success of Ethiopia’s telecom reforms.

The Impact of Increased Investment

The liberalization of Ethiopia’s telecom sector has been accompanied by substantial investments in network deployment. The combined market share of 3G and 4G subscriptions has skyrocketed from 16.6% in early 2019 to 61.3% in early 2024. This growth is indicative of a broader trend towards improved connectivity and access to mobile services across the nation. However, while these advancements are commendable, Omdia’s report suggests that further growth could be achieved through complete liberalization of the information and communications technology (ICT) market. Danson Njue, Omdia’s senior research analyst for the Middle East and Africa, emphasizes that awarding more operating licenses and reducing bureaucratic hurdles could significantly enhance competition and accelerate market growth.

The Road to Liberalization

Ethiopia’s journey towards telecom liberalization began in June 2018 when the government announced plans to allow private domestic and foreign investments in the sector, breaking decades of state control. In May 2020, the Ethiopian Communications Authority (ECA) initiated a request for Expressions of Interest (EOI) for two new nationwide telecommunications service licenses, alongside plans to sell a minority stake in the state-owned Ethio Telecom.

The landmark moment came in May 2021 when a consortium led by Kenya’s Safaricom was awarded a telecom license, effectively ending one of the world’s last standing telecom monopolies. Safaricom Ethiopia commenced its network rollout in August 2022 and officially launched its national network in October 2022, marking a significant milestone in Ethiopia’s telecom landscape.

Future Prospects and Challenges

Despite the progress made, challenges remain. As of 2023, Ethiopia had a population of approximately 126.5 million, yet only about 2.7% of households had broadband access, while around 62% owned mobile phones. Omdia forecasts that broadband penetration will increase to 4.7% by 2028, and mobile penetration could reach 89% by the same year. However, the government must accelerate the liberalization process by issuing additional operating licenses and partially privatizing Ethio Telecom to stimulate competition and market growth.

In June 2023, Ethiopia launched a tender for a third telecom license, with the deadline for submissions extended to October 2023. The government has also been planning the partial privatization of Ethio Telecom since mid-2018, with a tender for a 40% share launched in June 2021. However, the process has faced delays, and recent reports indicate a shift in strategy, with the government now looking to divest a 10% stake to local investors through the Ethiopian Securities Exchange (ESX).

The 5G Landscape

In September 2023, Ethio Telecom launched Ethiopia’s first commercial 5G network, marking another significant step in the country’s telecom evolution. Omdia projects that by the end of 2024, 5G will account for just 1.1% of total mobile subscriptions, while 3G and 4G combined will represent 69%. Both Ethio Telecom and Safaricom are investing heavily in network upgrades and expansions to meet the growing demand for mobile broadband services.

Despite the rollout of 5G, the lack of affordable devices poses a significant challenge to widespread adoption. Ethio Telecom is actively seeking partnerships with device manufacturers to address this issue and enhance the availability of 5G-capable devices in the market.

Investment Focus for Future Growth

To sustain the momentum of growth, Omdia recommends that Ethiopia focus its investments on expanding 4G, 5G, fixed wireless access (FWA), and fiber networks. While there has been notable progress in broadband deployment, Ethiopia still lags behind in broadband penetration compared to regional peers. Network operators are encouraged to extend their coverage beyond urban areas to increase service uptake and enhance network capacity to support high-bandwidth applications.

Moreover, affordability remains a critical factor in promoting broadband service adoption. Service providers should consider offering lower prices and bundled services to attract more users. Increasing smartphone penetration through affordable and accessible devices is also essential for driving growth in mobile services.

A Bright Future Ahead

Looking ahead, Omdia forecasts a robust growth trajectory for Ethiopia’s mobile service revenue, predicting a 74% increase between 2024 and 2029, with data revenue expected to triple during the same period. Mobile subscriptions are projected to grow by 35%, reaching approximately 112.7 million, driven by increased competition from Safaricom Ethiopia.

Ethio Telecom is expected to maintain its market leadership with a 78.5% market share, although this represents a decline from 94.2% in 2024 due to the competitive landscape. Fixed broadband subscriptions are also anticipated to grow by 63% to 1.3 million by 2029, with significant contributions from the FWA and fiber segments.

In conclusion, Ethiopia’s telecom sector is on the cusp of a significant transformation, driven by liberalization, investment, and competition. While challenges remain, the outlook is promising, and with continued efforts towards market liberalization and infrastructure development, Ethiopia is poised to become a key player in the digital economy of the Horn of Africa.