Government leaning towards a hybrid model for Ethio-Telecom bid

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Balcha Reba, Director General of ECA (Photo: Anteneh Aklilu)

Despite the decision is not yet officially given the government may take the hybrid model of process to include two more telecom operators.
The government is holding different and frequent public consultation on the way of liberalization and partial privatization of Ethio Telecom. For instance two consultation with different groups have been conducted in this week the event that organized by Ethiopian Communication Authority (ECA), and Ethio Telecom and Ministry of Innovation and Technology.
Experts who followed the process of liberalization told Capital that the government is expected to implement the hybrid model to select the two new operators.
So far the government is under discussion on three options; auction, beauty contest and hybrid models for the process to select the companies.
“based on the discussion that we participated it seems that the third model has get more good turn than the first two, which I think is the best way to give spectrum,” one of the sector expert who attended consultation that held a week ago at Ministry of Finance (MoF).
At the discussion the organized by MoF a week ago some of the participants expressed their expectation that the process will aligned with the hybrid.
“It seems that the process will be held under hybrid model,” Levi Girma, General Manager of BravoCom said that the meeting.
Hybrid is the model that includes the auction plus beauty contest. A beauty contest also known as public interest franchising or menu auction is a selection process where the regulatory agency awards the licenses to the operators that it perceives to be most suitable with the measurement of the proposed strategy of a company to do when it involve on the market.
An auction on the other hand is nothing less than a process where the firms who bid the most win the license.
Government sources also gave a hint to Capital that the process is expected to take via hybrid.
Balcha Reba, Director General of ECA, told Capital that the issue is under discussion that will be disclosed in the near future.
The literature and the idea to either use a beauty contest or an auction when awarding spectrum originates from the broader literature on public franchise bidding that was first suggested as a regulatory strategy in late 1960s.
Experts in the sector suggests that using the fusion of the two would be preferable for such bidding process to meet both the revenue expected to generate and the target that the government want to see when the sector is opened for new operators.
12 companies including Vodafone, Snail Mobile, Telkom, etisalat, Liquid Telecom, Orange, Kandu Global Telecom, Axian, and MTN have expressed their interest to be part of the two operators in the country.
International Finance Corporation, Roland Berger Gong, Coleago Consulting, Jones Day, and Earnest and Young are well known international companies consulting the process via different directions like finance, legal, media and communication and technical.
In related development on the discussion that organized by ECA on Monday September 28 participants recommended that the government to allow to include local investors to invest on telecom tower development.
At the beginning the government has been targeted to open the telecom tower development for interested infrastructure developers whether it is local or foreign. Since its announcement several foreign companies have been expressed their interest to invest on it.
However the government have paused its former plan for unspecific period and stated that the new coming telecom operators or Ethio Telecom will invest in the sector.
Ethio Telecom has been also argued that it had invested huge amount of dollar to develop the infrastructure in the past and it will be affected when the government allow new infrastructure companies to invest.
Currently there are about 7,300 telecom network towers throughout the country that owned by Ethio Telecom and it has also stated that it is expanded its system every time.
According to the plan until the new two comers develop their own network system they shall lease system from Ethio Telecom infrastructures. Besides that ECA has drafted Telecommunications Infrastructure and Collocation directive that impose operators to share their infrastructure each other.
National roaming scheme will be also implemented on the sharing of infrastructure.
on the discussion that held with legal experts, infrastructure developers and academia one of the participant said that he accepted the decision of the government to hold the opening up of the infrastructure sector for not telecom operators since the state enterprise already invested huge amount, “but the sector at least to be opened for local investors to build their capacity.”
Balcha, who appreciated the recommendation, said that there are interested local investors like steel industries that are currently supplying input for Ethio Telecom to invest in the sector. “The government may consider the recommendation,” he added.