Orange to consider bid for stake in Ethiopian state telecom

Orange SA is interested in buying a minority stake in Ethiopia’s state-owned telecom monopoly as part of the country’s privatization of the industry, according to people familiar with the situation.

The French group will consider bidding for the 40% shareholding in Ethio Telecom, said the people, who asked not to be identified as the process hasn’t been concluded. Orange opted to explore the acquisition of the stake rather than one of two new licenses being auctioned to international operators, they said.

Eyob Tekalign, the Ethiopian minister responsible for privatization, said the government can’t comment on who might be interested because the process hasn’t formally started. Orange declined to comment.

A successful sale of the stake in Ethio Telecom would deliver a boost to a wider liberalization intended to generate foreign exchange and improve service for the nation’s 110 million people -- the second-highest population in Africa. Ethiopian Prime Minister Abiy Ahmed’s administration has made privatization a key part of its plan for economic reform, aiming to boost investment and jobs.

Orange initially indicated an interest in taking one of the new licenses, but the company’s name was absent when a list of bidders was released last month. Instead, a consortium including Vodafone Group Plc, Johannesburg-based Vodacom Group Ltd. and Kenya’s Safaricom Ltd. made an offer, as did a partnership between MTN Group Ltd., Africa’s largest wireless carrier, and China’s Silk Road Fund.

The outcome of those auctions has yet to be announced.

Mobile Money

One sticking point for bidders was uncertainty over whether they will be able to offer a mobile-money service, a major generator of revenue and profit for African operators. The Ethiopian government eventually ruled that it won’t be allowed for now, a decision that cost the state about $500 million, Abiy said this week.

The new entrants will be allowed to add financial services in about a year, he said, though Ethio Telecom will be given the green light right right away. That would give Orange a potential advantage of its international rivals, should the talks to buy the stake be successfully concluded.

Details of Ethio Telecom’s finances are patchy, but the company generated revenue of about 25.6 billion birr ($600 million) in the six months through December and has 53 million subscribers, covering about half the population.

The horn of Africa country also has a minimal 4G network, presenting an opportunity for new entrants to expand rapidly.