To assist local startups with innovative business concepts in digital banking and technology, Ethio Telecom has introduced a new programme.
According to the telecom, the Ethiotel innovation programme is created to solve a number of difficulties businesses with new ideas encounter while seeking to commercialise their products.
The new programme will provide a Support and Commercialization package, which includes mentoring, networking, and experience sharing along with support in telecom resources, both financial and in kind.
A Three-Phased Support Approach
The first phase of the three-phase initiative, which will last from February 10 to April 30, 2023, began on Monday with Ethio Telecom.
Through a national competition, the telco will choose 100 startups utilising cloud and mobile financial service technology.
Startups with business concepts in the cloud and mobile banking have already been invited to participate in the competition. (Startups may submit an application by emailing ethiotelinnovation@ethiotelecom.et between February 10 and March 12, 2023.)
The initiative will provide expert, monetary, and material support to 100 selected companies to help them scale their successful concepts.
Additionally, the winners will receive sponsorship from Huawei Technologies so they can visit China and gain international experience.
II & III Phases
The second phase of the programme, which Ethio Telecom intends to undertake between March 20 and July 30, 2023, would have a wider focus than just the financial and technological industries.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard
The Ethiopian government has announced plans to reactivate the process of selling a 40% stake in state-owned Ethio Telecom and a separate plan to issue a second full telecommunications licence according to the finance ministry and telecoms regulator.
The telecoms industry is seen as the big prize in Prime Minister Abiy Ahmed’s push to free up the economy, but efforts to lure investment have been hit by a nearly two-year war in northern Tigray that has killed thousands and uprooted millions.
The government is asking international companies to submit expressions of interest for the partial sale of Ethio Telecom, a finance ministry document showed.
Ethiopia’s Communication Authority (ECA) said it had also revived plans to issue a second full-service telecoms licence, for a third telecoms company.
“ECA now plans to resume the licensing process for a third licence or the second new full-service nationwide telecoms licence,” it said in a statement.
The regulator was inviting potential bidders and any interested parties to participate in a consultation process, it added.
The comments and feedback from this consultation will guide the next steps of the licensing process
The regulator intended to launch a formal tender process for the licence by the middle or end of January 2023, its director-general, Balcha Reba, said.
The moves by the finance ministry and the ECA come after Ethiopia’s federal government and regional forces in Tigray signed a ceasefire agreement on 2 November to end the fighting.
In March, the government said it had postponed the planned partial privatisation of Ethio Telecom because of the prevailing economic environment, both at home and abroad. The tender for the partial sale had been launched in June 2021.
The finance ministry document showed Deloitte Consulting had been appointed as transaction adviser on the proposed partial privatisation of Ethio Telecom, giving companies until 20 December to submit expressions of interest.
The telecoms regulator said it had set a 16 December deadline for comments from interested parties and potential bidders. “The comments and feedback from this consultation will guide the next steps of the licensing process,” it said.
The tender process for the second licence had been suspended in December 2021 after proposals were sought that September.
In May 2021, a consortium led by Kenya’s top operator, Safaricom, won the first international licence with a bid of US$850-million, which could serve as a guide price for the other licence.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Ethiopia ’s national telecommunications company, Ethio Telecom, has applied to the National Bank of Ethiopia for a license to begin offering loans and savings services via telebirr as part of its strategy to extend its digital financial services.
“We are working to strength the digital economy in order to enable citizens to have an easy system whilst promoting financial inclusion,” said Firehiwot Tamiru, CEO of Ethio telecom, who said Ethio telecom awaits the permit which is due soon.
Here’s What You Need To Know
Additionally, the telecommunications company recently reached an agreement with Ethiopian Airlines on the online purchase of domestic flight tickets via telebirr, ensuring the availability of a variety of online payment alternatives.
Ethiopian Airlines’ Chief Commercial Officer, Lemma Yadecha, who signed the deal on the company’s behalf, stated that the airline has difficulty processing transactions above 30,000 birr round trip. He claimed that direct sales for the given sum are now conceivable.
The payment system integration agreement inked between the two government enterprises and significant income generators for the Ethiopian government would enable Ethiopian Airlines passengers to use telebirr to purchase aircraft tickets online at any time and from any location.
“E-money service is playing a pivotal role in fostering the digital economy that the nation aspires to achieve along with improving our community’s digital payment system experience and in modernizing the existing customary cash transactions of institutions’ payment systems,” said Firehiwot.
One Year After, 17.6 million Customers For Telebirr
With only a few days remaining until the one-year anniversary of its inception in May 2021, telebirr has amassed a customer base of 17.6 million, reports Capital Ethiopia.
Over the course of the year, over 12.58 billion birr has been transferred or transacted locally; while over half a million USD (528.4 thousand dollars) has been transferred via telebirr from 34 countries in collaboration with eight international telebirr remittance partners in less than five months, the report noted.
The report notes that Telebirr today operates 353 stores and provides service to over 16 thousand merchants through 80 master agents, 64,000 agents, and over 16 thousand merchants. Telebirr is also integrated with 12 commercial banks to provide financial transfer services via the platform.
It also notes that over 52 organizations, including those that collect traffic fines, have integrated their services with telebirr to enable them to do business online, collect monthly bills, and offer a variety of online services to their consumers. Additionally, Ethio Telecom has begun the process of integrating the telebirr payment system with over 20 governmental and non-governmental organizations and will shortly officially launch the service.
“Enabling various business transaction payments ranging from making payments for small transaction to transferring large amount of money via telebirr, has significantly contributed to the adoption of digital payment system,” the firm’s CEO was quoted as saying recently.
loans and savings services Ethiopia loans and savings services Ethiopia
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh
It’s been a rollercoaster ride for Ethiopia’s state-owned telecoms company, Ethio Telecom, which in May this year launched a mobile money service, Telebirr. According to the company’s CEO Firehiwot Tamru, telebirr now has over 9.5 million users and is growing, with 938 million birr ($20m) transacted through the service. Ethio telecom has equally received the much-anticipated permit from the National Bank of Ethiopia to launch an international remittance service, according to trusted sources.
Firehiwot Tamru, CEO, Ethio Telecom
To that end, Ethio Telecom is attempting to link its system with that of its international partners, a procedure that is currently being tested. Ethio Telecom had planned to provide the service by the end of the year, but unforeseen circumstances have hampered the telecom service provider.
Customers will be able to receive money from abroad once telebirr begins offering the service.
Telebirr users, both registered and unregistered, can send and receive international money transfers. Customers can receive money from friends and relatives who live overseas via their mobile number.
Already, 26,442 agents have provided telebirr services across the country, and the platform has been integrated by eight banks.
The new service, telebirr, will mark a shift for Ethiopia, where the banking system is seen as inefficient, with 19 commercial banks serving a population of about 115 million people, according to the Telecommunications CEO. To this aim, tele birr is predicted to account for approximately half of Ethiopia’s total GDP, or 3.5 trillion birr($75.3bn) in transactions, during the next five years.
Number of mobile money users as a percentage of the population of the relevant African country…Source: African Payment Solutions
The Latest Foray Into Mobile Money And Remittance Operations By Ethio Telecom Comes On The Heels Of The Loosening Of The Country’s Regulatory Barriers
In October 2020, after series of negotiations and deliberations, the National Bank of Ethiopia (NBE), granted a license to state-owned telecoms company, Ethio Telecom, to start mobile money service in the country.
For the first time in Ethiopia’s history, the regulation allowed mobile money transactions. However, there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.
“As part of the application process,” the directive read, in parts, “the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
The regulation has also opened up the country’s financial services sector to include that a licensed payment instrument issuer may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country.
The National Bank of Ethiopia also issued, that same year, a “Licensing and Authorisation of Payment System Operators Directive (ONPS/02/2020), allowing financial technology companies (fintechs) to start off payment processing and related services in Ethiopia.
Five licenses under the payment system operator directive include National Switch, Switch Operator, ATM Operator, POS Operator, and payment gateway license.
Telebirr remittance mobile money Telebirr remittance mobile money
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Ethio Telecom, Ethiopia’s national telecommunications company, appears to be gaining ground on big competitors such as Safaricom, which has declared ambitions to begin commercial operations in the East African country in 2022. The telco has disclosed that it is nearing completion on plans to deploy an international remittance service system via its mobile money service, telebirr, in the near future.
Frehiwot Tamiru, CEO of ethio telecom
Here Is What You Need To Know
Frehiwot Tamiru, CEO of ethio telecom, said the company has finished preliminary preparations for the introduction of an international remittance service via telebirr.
Frehiwot said application for an operating license has been made to the National Bank of Ethiopia (NBE) to engage in such activities, and is expected to be approved in a short amount of time.
She also stated that the new service will allow clients to receive money received from other countries via their cell phones.
Telebirr has so far given services such as purchasing airtime, transferring and receiving money, and receiving paid locally.
Frehiwot claimed that, in addition to international remittance services, the company will shortly start providing small loans.
Number of mobile money users as a percentage of the population of the relevant African country…Source: African Payment Solutions
Late To East Africa’s Booming Mobile Money Market?
Despite being the second most populous country in Africa with a population of more than 109 million, only about 33.86% of Ethiopian adults have formal accounts at financial institutions in Ethiopia, compared to the neighboring Kenya with over 82%.
In 2019, the Global System for Mobile Communications (GSMA) declared East Africa number 1 in the world in terms of transaction volume and value of mobile money.
With more than 102 million active accounts, generating more than 17.1 billion transactions — an unmatched $293.4 billion in value and a 24% increase from 2018 — the region is the highest of any other sub-regions in the world. Sadly, none of these figures included Ethiopia.
It is therefore little wonder that a 2018 report by the GSMA described Nigeria, Ethiopia and Egypt, home to a combined adult population of over 242 million, as Africa’s mobile money sleeping giants.
Ethiopia’s low rate of mobile money usage could be attributed to the rigid regulatory walls that have ensured monopoly and lack of innovation. Telecommunication, aided by enabling legislations, has particularly driven the widespread adoption of the relatively new financial service type across Africa.
Safaricom’s M-Pesa, recently acquired by Vodacom, accounted for 655.95 million out of the 810.9 million mobile money transactions recorded in Kenya in the third quarter of 2019 alone. In Uganda, MTN enjoys over half the market share for mobile money.
“The reasons for this vary,” notes GSMA in its report about why Nigeria, Egypt and Ethiopia remain the continent’s sleeping giants when it comes to mobile money usage in Africa. “…In Ethiopia, a strictly regulated telco, restrictions on competition, lack of internet connectivity, and low levels of consumer trust and financial literacy have created barriers to uptake and market entry.”
Finally Loosening The Regulatory Barriers And Joining The League
In October 2020, after series of negotiations and deliberations, the National Bank of Ethiopia (NBE), finally granted a license to state-owned telecoms company, Ethio Telecom, to start mobile money service in the country.
For the first time in Ethiopia’s history, the regulation allowed mobile money transactions. However, there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.
“As part of the application process,” the directive read, in parts, “the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
The regulation has also opened up the country’s financial services sector to include that a licensed payment instrument issuer may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country.
The National Bank of Ethiopia also issued, that same year, a “Licensing and Authorisation of Payment System Operators Directive (ONPS/02/2020), allowing financial technology companies (fintechs) to start off payment processing and related services in Ethiopia.
Five licenses under the payment system operator directive include National Switch, Switch Operator, ATM Operator, POS Operator, and payment gateway license.
The Ethiopian government is collaborating with global telecoms equipment manufacturer Ericsson to expand its 4G services into the South West region of Ethiopia during 2021. The partnership with Ethio Telecoms correlates with Ethiopia’s plans to introduce international investors and partners into their monopoly-laden and virtually untapped telecoms space.
Frehiwot Tamru, CEO of Ethio Telecom
Ethio Telecoms will use Ericsson Radio System products and solutions for this deployment. The core expansion will take place in Ethio Telecom’s regional data centres and the data centres in Addis Ababa.
Through this partnership, Ethio Telecom will seek to modernise its network by transitioning from the current Operations Support Systems (OSS) systems to the more advanced and high-capacity Ericsson Network Manager (ENM).
Ethio Telecom will also introduce Ericsson Cloud Packet Core and Ericsson NFVI (Network Functions Virtualisation Infrastructure) as part of the modernisation effort. The 4G network will also use Ericsson Radio System products.
The telecom’s expansion of 4G comes at a time when the demand for 4G is growing exponentially. According to the latest Ericsson’s Mobility Report, 4G subscriptions increased by approximately 100 million worldwide during the first quarter of 2021.
“We are excited to collaborate with Ericsson in expanding our 4G/LTE Advanced service. This will bring high-speed internet to the South West region, which will be vital for achieving Ethiopia’s digitalisation ambitions while improving the reach of telebirr, our mobile money service,” says Frehiwot Tamru, CEO of Ethio Telecom.
“We understand that digitalisation has the potential to boost the livelihoods of Ethiopians while improving access to financial, healthcare, education, and services and we believe our collaboration with Ericsson will take us one step closer to a digital Ethiopia.”
“Ericsson began the partnership with Ethiopia and Ethio Telecom in 1894. Fast forward nearly 130 years later and we have together launched one of the most advanced 5G ready networks in the region. As the world enters a digital age with 5G technology gradually rolling out across the world, we are reiterating our commitment to Ethiopia and Ethio Telecom to support with our technology leadership and global expertise,” says Todd Ashton, VP and Head of Ericsson South and East Africa.
Recently, massive African telcos like Safaricom and MTN have been making strides into introducing their services into the fallow Ethiopian market which has a population of over 100 million people, where only about 20% have access to the Internet, and less than 40% have a mobile phone.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
The Ethiopian government has announced for a tender process for the sale of a 40% stake in state-owned telecommunications company, Ethio Telecom. That means potential investors can now register their interest starting Tuesday. This is the first stage in a lengthy process that will lead to the selection of a successful bidder. The proposed minority sale of the carrier is part of a broader plan to liberalise the country’s monopolistic telecoms sector. In addition, two foreign carriers are to be granted licenses to operate in the hugely untapped market.
Ethiopian Prime Minister Abiy Ahmed
“The government wants state-owned enterprises to be competitive and productive, the authorities’ motivation for selling a part of Ethio Telecom to private operators,” Deputy Director of Public Enterprises, Holding and Administration Agency, Zinabu Yirga, said at a press conference in the capital Addis Ababa on Monday. “As part of the broader opening up of the sector, Ethiopia is also moving to license private operators to compete with Ethio Telecom.”
Announced in 2019 and driven by Prime Minister Abiy Ahmed, the liberalisation plan has been met with several delays caused by the coronavirus pandemic and an internal crisis in the Tigray region. However, the plan has gathered pace over the past six months. In May, the government awarded one of the two available private operating licences to break up Ethio Telecom’s monopoly on the sector.
The Global Partnership for Ethiopia, a telco-consortium led by Kenya’s Safaricom, was announced as the winner after a successful bid of around $850 million. Meanwhile, a second offer of around $600 million from South Africa’s MTN Group was deemed too low by the regulator, which is now preparing to reauction the final licence.
According to Brook Taye, a senior advisor at the finance ministry, the 40% in Ethio Telecom will be sold as a single stake to a single investor. It is however unclear how much the stake would be worth but the tender process is sure to attract significant interest from many telcos around the world.
This is due to the attractiveness of Ethiopia’s untapped telecoms market. In a population of over 100 million people, only about 20% have access to the Internet, less than 40% have a mobile phone and only 5.8% of the people use social media, according to a report from DataReportal.
Founded in November 2010, Ethio Telecom currently has around 53 million subscribers and has since December generated revenue of around $600 million. According to reports, the government plans to retain a 55% stake in the operator while the remaining 5% will be offered to domestic investors through an initial public offering.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Ethiopia has launched ‘Telebirr,’ a mobile money service that enables Ethio Telecom, the country’s telecom services provider’s customers to send, store, and receive money using only their phone number.
#Ethiopia today launched ‘Telebirr’ – a mobile money service that allows Ethio Telecom mobile customers to send, store and receive money by just using their telephone number. ‘Telebirr’ aims to extend mobile services to our financially excluded sections of society. 1/2 pic.twitter.com/ZYiahYSQpo
With the launch, the stage is now set for some fierce competition between Ethio Telecom, a telecom company owned by the country’s government, and M-Birr a mobile money company which has been active since 2009 with over 1.8 million users and a network of almost 33,000 points-of-presence covering branches, agents and other merchants. This competition stems from the fact that with this launch, Ethio Telecom’s Telebirr will now be available to its over 53 million customers.
Through TeleBirr, customers will be able to email, receive, and store money using their mobile phones via the TeleBirr mobile money service.
They will also be able to pay for goods, utilities, and utility bills, as well as receive money from the diaspora, apply for loans, and connect their bank accounts to their TeleBirr wallet.
How to Register for Telebirr
Users may make self-registration for telebirr using their own mobile phone via App/USSD, or by visiting the nearest Ethio telecom’s shop, authorized retail agents or partner bank branches.
Number of mobile money users as a percentage of the population of the relevant African country…Source: African Payment Solutions
Late To East Africa’s Booming Mobile Money Market?
Despite being the second most populous country in Africa with a population of more than 109 million, only about 33.86% of Ethiopian adults have formal accounts at financial institutions in Ethiopia, compared to the neighboring Kenya with over 82%.
In 2019, the Global System for Mobile Communications (GSMA) declared East Africa number 1 in the world in terms of transaction volume and value of mobile money.
With more than 102 million active accounts, generating more than 17.1 billion transactions — an unmatched $293.4 billion in value and a 24% increase from 2018 — the region is the highest of any other sub-regions in the world. Sadly, none of these figures included Ethiopia.
It is therefore little wonder that a 2018 report by the GSMA described Nigeria, Ethiopia and Egypt, home to a combined adult population of over 242 million, as Africa’s mobile money sleeping giants.
Ethiopia’s low rate of mobile money usage could be attributed to the rigid regulatory walls that have ensured monopoly and lack of innovation. Telecommunication, aided by enabling legislations, has particularly driven the widespread adoption of the relatively new financial service type across Africa.
Safaricom’s M-Pesa, recently acquired by Vodacom, accounted for 655.95 million out of the 810.9 million mobile money transactions recorded in Kenya in the third quarter of 2019 alone. In Uganda, MTN enjoys over half the market share for mobile money.
“The reasons for this vary,” notes GSMA in its report about why Nigeria, Egypt and Ethiopia remain the continent’s sleeping giants when it comes to mobile money usage in Africa. “…In Ethiopia, a strictly regulated telco, restrictions on competition, lack of internet connectivity, and low levels of consumer trust and financial literacy have created barriers to uptake and market entry.”
Finally Loosening The Regulatory Barriers And Joining The League
In October 2020, after series of negotiations and deliberations, the National Bank of Ethiopia (NBE), finally granted a license to state-owned telecoms company, Ethio Telecom, to start mobile money service in the country.
For the first time in Ethiopia’s history, the regulation allowed mobile money transactions. However, there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.
“As part of the application process,” the directive read, in parts, “the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
The regulation has also opened up the country’s financial services sector to include that a licensed payment instrument issuer may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country.
The National Bank of Ethiopia also issued, that same year, a “Licensing and Authorisation of Payment System Operators Directive (ONPS/02/2020), allowing financial technology companies (fintechs) to start off payment processing and related services in Ethiopia.
Five licenses under the payment system operator directive include National Switch, Switch Operator, ATM Operator, POS Operator, and payment gateway license.
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
In Ethiopia, the stage is set for some fierce competition between Ethio Telecom, a telecom company owned by the country’s government, and M-Birr a mobile money company which has been active since 2009 with over 1.8 million users and a network of almost 33,000 points-of-presence covering branches, agents and other merchants. This competition stems from the fact that Ethio Telecom has just announced the launch of TeleBirr, its mobile money service that will be available to its over 53 million customers starting in May 2021.
CEO of Ethio Telecom, Frehiwot Tamiru
Customers will be able to email, receive, and store money using their mobile phones via the TeleBirr mobile money service. They will also be able to pay for goods, utilities, and utility bills, as well as receive money from the diaspora, apply for loans, and connect their bank accounts to their TeleBirr wallet.
The announcement came just days after Ethio Telecom launched a 4G network for its customers in the country’s south west, which will include cities such as Hosana, Arba Minch, Wolaita Sodo, Wolkite, Jinka, and Butajira, among others.
Mobile Money statistics in 2019 for Sub-Saharan Africa. Source: GSMA
Late To East Africa’s Booming Mobile Money Market?
Despite being the second most populous country in Africa with a population of more than 109 million, only about 33.86% of Ethiopian adults has formal accounts at financial institutions in Ethiopia, compared to the neighboring Kenya with over 82%.
In 2019, the Global System for Mobile Communications (GSMA) declared East Africa number 1 in the world in terms of transaction volume and value of mobile money. With more than 102 million active accounts, generating more than 17.1 billion transactions — an unmatched $293.4 billion in value and a 24% increase from 2018 — the region is the highest of any other sub-regions in the world. Sadly, none of these figures included Ethiopia.
It is therefore little wonder that a 2018 report by the GSMA described Nigeria, Ethiopia and Egypt, home to a combined adult population of over 242 million, as Africa’s mobile money sleeping giants.
Ethiopia’s low rate of mobile money usage could be attributed to the rigid regulatory walls that have ensured monopoly and lack of innovation. Telecommunication, aided by enabling legislations, has particularly driven the widespread adoption of the relatively new financial service type across Africa.
Safaricom’s M-Pesa, recently acquired by Vodacom, accounted for 655.95 million out of the 810.9 million mobile money transactions recorded in Kenya in the third quarter of 2019 alone. In Uganda, MTN enjoys over half the market share for mobile money.
“The reasons for this vary,” notes GSMA in its report about why Nigeria, Egypt and Ethiopia remain the continent’s sleeping giants when it comes to mobile money usage in Africa. “…In Ethiopia, a strictly regulated telco, restrictions on competition, lack of internet connectivity, and low levels of consumer trust and financial literacy have created barriers to uptake and market entry.”
Number of mobile money users as a percentage of the population of the relevant African country…Source: African Payment Solutions
Finally Loosening The Regulatory Barriers And Joining The League
In April 2020, the National Bank of Ethiopia issued a regulation called Licensing & Authorization of Payment Instrument Issuers. For the first time in Ethiopia’s history, the regulatory regime will allow mobile money transactions. But there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.
“As part of the application process,” the directive read, in parts, “the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
In any case, banking, insurance, brokerage services, and legal consultancy still remain off limits for foreign investors, according to a new set of investment rules published on the Ethiopian Investment Commission’s website.
The implication of this is that the two telcos to be selected from the ongoing licensing process in Ethiopia —two out of either MTN, and Global Partnership for Ethiopia, a consortium of telecom operators comprising Vodafone, Vodacom, and Safaricom — will not be allowed to engage in mobile money services.
“When the telecom sector is liberalised,” said CEO of Ethio Telecom, Frehiwot Tamiru, at a consultative meeting Ethio Telecom held with IT and startup companies on the on-going national telecom reform program, “there are guiding policies and directives. We are not opening up completely.”
Like in Nigeria, mobile money operations in Ethiopia will solely be regulated by the National Bank of Ethiopia and not the Ethiopian Communication Authority (ECA), even though telcos may be involved.
“Mobile money service involves two sectors — both the telecom and banking sector,” argued Balcha Reba (Eng.) director general of the Ethiopian Communication Authority. “Since it is a financial service it has to be regulated by the NBE. But, it also involves the telecom sector. Companies would provide the service using the telecom infrastructure; so ECA should also look at the telecom side. So ECA, NBE and Ethio telecom have to discuss the matter.”
And since the matter is yet to be discussed, the NBE remains the sole regulatory authority for mobile money operations in Ethiopia.
The Ethiopian Ministry of Finance (MoF) is also in the process of partially privatising Ethio telecom. To that effect, the ministry has engaged Deloitte Consulting as its transaction advisor to source a strategic partner that would acquire 40 percent stake in Ethio Telecom.
The launch of TeleBirr will therefore be a game changer.
TeleBirr mobile money Ethiopia TeleBirr mobile money Ethiopia TeleBirr mobile money Ethiopia
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
The plan is not only to allow international operators to enter Ethiopia’s telecom market, it also involves letting state-owned telecom company, Ethio Telecom go international. This is what the country’s latest regulation modifying the rules establishing the telco has stated. The new Ethio Telecom Establishment Regulation approved by the Council of Ministers two weeks ago, apart from allowing Ethio Telecom to explore the country’s financial services industry, would also enable the firm to explore the international market.
Frehiwot Tamiru, CEO of ethio telecom
“The regulation will boost our capacity and expand our reach both locally and internationally,” said Frehiwot Tamiru, CEO of ethio telecom.
“There has been unmatched growth of our assets and paid-up capital. Our total assets grew by 42 percent using IFRS reporting standard, while our paid-up capital remained unchanged at 40 billion Birr before the regulation came into effect,” Frehiwot added.
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In addition to allowing Ethio Telecom to invest locally in the mobile banking sector and provide digital finance services, the new Establishment Legislation grants Ethio Telecom the freedom to participate in various sectors of the global market.
The regulation also increased the paid-up capital of Ethio Telecom from Birr 40 billion (USD 1 billion based on current market price) to Birr 400 billion (USD 10 billion), making it Ethiopia’s most capitalized state-owned enterprise.
“We want to provide mobile banking services as long as our telecom infrastructure permits,” said Frehiwot, of the new regulation which also permits Ethio Telecom to venture into financial services. Frehiwot, however, said it would not outsource future mobile money services to third parties. “We may consider partnerships after utilizing our full potential,” he said.
In the first half of the current financial year, the telecommunications provider, which aspires to become the preferred telecommunications operator among customers and partners in Ethiopia, said it posted revenues of Birr 25.5 billion ($646m) , achieving 95 percent of its target. It also said there was a 12.3 percent rise in sales compared to the same time last year.
Although mobile voice contributes to almost half of the company’s sales, 26 percent contribute to data and internet, and the rest comes from foreign market, value-added services, and other sources. During the first six months of the 2020/21 financial year, Ethio Telecom also generated USD 80.2 million in forex marketing new revenue streams.
Last week, the telecom provider invited telecom providers bidding to obtain a license in Ethiopia to share its infrastructure, with 50.7 million subscribers and a regional reach of 85.4 percent. Orange, MTN and Safaricom have shown an interest in leasing ethio telecom properties so far and are exploring new business models and agreements on how to do so.
“We want to benefit more from leasing our telecom infrastructure. We must diversify our source of income that mostly comes from voice call and internet,” Frehiwot said.
Plans have been on since October 2019 to allow private companies (mostly foreign companies: two out of either Etisalat, Axian, MTN, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile, and Global Partnership for Ethiopia, a consortium of telecom operators comprising Vodafone, Vodacom, and Safaricom) to take up to 40% stake in Ethio Telecom.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
