Frehiwot Tamiru - Afrikan Heroes

Ethio Telecom Goes For Ethiopia’s Remittance License, Targets Lending Using Telebirr

September 5, 2021

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.

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.

Telebirr remittance lending — *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%.

The country has also been largely left out of the booming mobile money market across the East African region. As of 2019, the total value of mobile money transactions reached $17 billion in Kenya, $12 billion in Tanzania and $5.9 billion in Uganda.

Even war-torn Somalia, with a meagre population of 15 million, about seven times smaller than Ethiopia’s, recorded approximately 155 million mobile money transactions, worth $2.7 billion, every month in 2018.

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.

This followed the issuance, in April 2020 by the bank, of a regulation called Licensing & Authorization of Payment Instrument Issuers.

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 lending Telebirr remittance lending Telebirr remittance lending

Foreigners Are Still Not Allowed To Participate In Ethiopia ’s Financial Services Sector Under New Rules

Ethiopia’s New Law Will Also Allow Ethio Telecom Go International

January 24, 2021

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.

“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.

Here Is What You Need To Know

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

Ethiopia’s Only Telecom Company Ethio Telecom Finally Goes Mobile Money

October 7, 2020

In Ethiopia, there is only one telecommunication company, called Ethio Telecom, although plans have been on since October last year to allow private companies to take part in the market. While Ethio Telecom is waiting for that to happen, it is adding banking via mobile money to its range of offers. After series of negotiations and deliberations, the National Bank of Ethiopia (NBE) has finally granted a license to the company to start mobile money service in the east African country.

*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%.

The country has also been largely left out of the booming mobile money market across the East African region. As of 2019, the total value of mobile money transactions reached $17 billion in Kenya, $12 billion in Tanzania and $5.9 billion in Uganda. Even war-torn Somalia, with a meagre population of 15 million, about seven times smaller than Ethiopia’s, recorded approximately 155 million mobile money transactions, worth $2.7 billion, every month in 2018.

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. 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.

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 Etisalat, Axian, MTN, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile, and Global Partnership for Ethiopia, a consortium of telecom operatorscomprising 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. However, it is not yet clear if the international firm that would acquire stake in Ethio Telecom would indirectly be permitted to engage in mobile money business.

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