US Didn’t Fund Telecom Consortium

The US International Finance Development Corporation did not release the USD 500 million financing it promised to the Global Partnership for Ethiopia consortium, The Reporter learnt.

Hence, the consortium that won one of the two telecom operator licenses for USD 850 million paid from the coffers of the members of the consortium. The other bidder, MTN backed by the Chinese Silk Road Fund, failed to secure the license for which it offered USD 600 million.

Speaking to The Reporter, Shameel Joosub, CEO of Vodacom, one of the partners in the consortium, said that the deal is not yet finalized. The signing and launching ceremony was held on June 8, 2021 at the newly inaugurated Sheger Park in the presence of PM Abiy Ahmed and President Uhuru Kenyatta.

However, this delay in finalizing the deal from the US side came amidst concerns that the financing would face hurdles as a result of recent sanctions the Biden administration placed on Ethiopia apart from visa restrictions for current and former Ethiopian officials.

“We haven’t finalized our deals as yet. Of course, the investment that’s going into paying the license fee is coming directly from the partners in the consortium that have put the money to fund it. There are various financing options that are available going forward. And of course, now that you’ve got the license, a lot of that becomes more credible and now you start further discussions with different entities to look at the cost of funding. Of course, there’s various modes of funding, there’s developmental funding, there’s bank funding, there’s supplier of funding. So, there are various sources of funds that you look at including the investment we made directly. I think what’s encouraging is, you’ve got a credible Consortium, which is made up of parties like Sumitomo, CDC, Safaricom, Vodacom, Vodafone. You’ve got a strong consortium that can afford to invest directly,” Joosub said.

He added that they had discussions with the lenders about the financing.

The consortium in which Safaricom holds 56 percent shares, Vodacom 6.2 percent, Japan’s Sumitomo 25 percent and UK’s CDC 10 percent is expected to make eight billion dollars worth of investments in the coming 10 years.

On May 22, 2021, the General Director of the Ethiopian Communications Authority, Balcha Reba (Eng.) stated following the announcement of the license award, “I am also very pleased the consortium will invest 8 billion USD over the next 10 years.”

The areas of this investment, according to Joosub, will be put into infrastructure construction as well as the anticipated mobile money which is expected to be allowed for foreign investors to venture into.

“The big investment is going to be into network equipment. We have to build out the network and, there are different elements from the various stations to the core Network, to the billing systems, and IT system that need to be implemented and the fiber that needs to be built. So, there’s a lot of network structure, IT systems but then of course, introducing our platforms into market, as well as, you know, M-Pesa or mobile money will be made available within a year. So, big part of it is also about rolling out and preparing for mobile money. We are going to have to build distribution of power and the local distribution channels. So, there is a lot of investment that’s going to be required. And then, of course, we also going to be investing into people, and growing out the employment. But also empowering a lot of SMEs, small businesses, to basically be able to provide a world-class network in Ethiopia,” he highlighted.

The consortium is also said to launch a low orbit satellite to expand accessibility across Ethiopia. Vodacom’s CEO says, “The whole principle is to make sure that Ethiopia is always up to date with the latest technology. So, when we launch 4G; soon after we want to launch 5G.”