The infrastructure sharing agreement between Ethio telecom and Safaricom Ethiopia lags behind with the latter delaying to pay the agreed down payment.
After a period of negotiations on 13 April 2022, at a meeting convened by the Ethiopian Communication Authority (ECA), the two telecom operators reached agreements in principle on the key terms. As sources told Capital, Safaricom had selected 1000 towers from the total of 7100 towers Ethio telecom has, which is around 14 percent at a price point of 90 million dollars.
Even though there were concerns on the site selection, Safaricom hasn’t been able to pay the down payment of USD 3 million to start the sharing process with Ethio telcom.
According to source, it will take up to 4 to 5 months to kick start the sharing process after the down payment has been made.
Safaricom Ethiopia’s phased launch is expected to commence this August in the city of Dire Dawa and then accelerate to 24 other cities, including Addis Ababa in the months that follow. Of course the initial launch was slated for April but faced setbacks to which issues on infrastructure were set as one of the result to the delay.
To start its operation in Dire Dawa, Safaricom has rented a data center from Ethio telecom, however regarding tower sharing as the source indicated Safaricom is focusing on building its own infrastructure leaving the agreement behind.
The new operation of the telecom entrant has ambitions of achieving gross margins of 40 per cent in 10 years. The target is backed by heavy investments that the subsidiary will make in hiring staff and building infrastructure to acquire customers in the country with a population of more than 100 million.
On its latest report Safaricom PLC which has 55.71 percent share from the consortium has set Infrastructure as one of its investment risk in Ethiopia including political and regulatory and also currency required for identification and mitigation. “We are now working together with Ethio Telecom on the finalization of these important agreements and the implementation required for our commercial launch,” said Safaricom in its reports.
The agreement is said to last for 10 years on infrastructure sharing and interconnection. Severe disagreements had earlier arisen between the two companies regarding the price and currency of payment and under this agreement, the payment will be in both currencies, with varying ratios across the infrastructure type.
Ethio telecom has 7,100 towers and over 22,000Km of fiber optics all over the country. The agreement in principle with Ethio telecom was announced in April barely a month after the telecom operator signed an infrastructure-sharing agreement with the state-owned Ethiopian Electric Utility (EEU) to deploy its aerial fibers.
“Both agreements are really important because even though we are building our own network towers and transmissions at the same time in line with that it make sense to share infrastructure rather than to build two in the same area,” said Matthew Harrison Harvey, Safaricom Ethiopia’s Chief Regulatory and External Affairs Officer, on the company’s press release adding, “This will enable the company to have options and redundancy indicating that the agreement is now under implementation.”
In 2021, the Global Partnership consortium for Ethiopia, led by Safaricom, was awarded a license by the Ethiopia’s Ministry of Finance and the ECA to establish a new telecoms network and to operate in the country.
Safaricom, which paid 850 million dollars for a 15-year license, is building its infrastructure development project, having contracted Huawei and Nokia for its network development and also uses building-tops to its networking.
The company has so far invested 1 billion dollars including the license fee to the government of Ethiopia in addition to signing an infrastructure and interconnectivity agreement with Ethio telecom.
“Our expectation, based on feedback from the Government of Ethiopia, and with our break-even target set at year 4, is that forex availability will have been resolved by then, long before we will need to repatriate any dividends from the business,” read Safaricom’s report.
With regards to the recent delay in down payments, officials from Safaricom have refused to comment on the issue.