ETC: Same old wine in new bottle?

Originally posted on Dec.11, 2010

The Deal

The Ethiopian government has ceded the management of the Ethiopian Telecommunication Corporation (ETC) to a French company: Orange.  Official reason being the corporation’s inability to meet the ever increasing demands of the country. Apart from the management, ETC also got a new name: Ethio -Telecom. We can as well expect a brand new logo and a website. For the two years contract the Arcueil based company will be paid 30 million euro. (USD 40 mil.)

Orange, which is the France Télécom branch for mobile networks and internet services, seems the right choice in that the company has decades of experience in more demanding situations. It is expected they will do something to the ailing mobile phone and Internet services of the country.  So far the government decided to outsource only the management part of the company that prevents Orange from undertaking a major infrastructural change, which at the moment is the preserve of the Chinese.

Why now?

ethio-telecomThe timing can be attributed to another development at corporation. Back in March of this year the Mauritius based SEACOM has won the contract to supply ETC with international broadband fiber optics connectivity through their link via Djibouti.   The agreement means ETC may soon stop using satellites for internet and international phone connections. The fiber optics technology transmits data using light signals much faster than the satellite link which is considered unreliable and very expensive.

The pressure by the World Bank, IMF and others like the United States might have also been a factor.  In one of the WikiLeaks documents, Assistant Secretary of African Affairs to the State Department, Mr Johnnie Carson is quoted as telling Meles “to hasten steps to liberalize the telecommunications and banking industries in Ethiopia.” So all these may call for a new kind of management.

The “over my dead body” syndrome

One thing which is not clear is whether this step is a prelude to liberalize the sector in general. The de facto head of the nation’s telecom, who is also the Minister of Communications and Information Technology, Mr Debretsion Gebremichael echoed the “over my dead body” rhetoric of his party. “The door is closed,” he told the audience that attended the management handover ceremony when asked whether the sector will be liberalized.

While management is one of the problems, it is hardly crucial in the Ethiopian case. The most important problem in the country’s telecom industry stems from the authorities feeling of insecurity. They have to make sure every aspect of the telecommunications industry in the country should be under their control.  The minister who is running this show is not known for his engineering wits neither is he a geek. He was first and foremost a spy who managed to silence foreign broadcast that differ in their outlook from the one espoused by the revolutionary democrats.


The Ethiopian telecommunications sector is in shambles. It needs intervention.  Ethiopia’s phone penetration is less than 5% while that of the neighboring Kenya is more than 50% which means every other Kenyan owns a cell phone. Think of Ethiopia. That time seems light years away.
The giant but dormant company has been a source of rivalry between Swedish and Chinese firms. Through various influences and backdoor deals, the Chinese have been able to get a huge slice of the Ethiopian telecom cake.

ETC was the most mismanaged and abused institution that in the last decade it had about four general managers, one of which is still in jail for an alleged corruption scandal. He is charged with awarding a mobile network contract to the Swedish firm Ericsson in violation of procurement regulations that was said to have caused the state a loss of $121 mil.

So what…?

People do not own cell phones or connect to the internet for mere show. That time has gone. People make business with the help of these technologies. They make transactions in minibuses, they communicate with partners, exchange business information while they walk. Brokers can hardly survive without cell phones. Folks do all kind of things. The communication technology facilitates that. Bear in mind also they pay for the service which goes to the state’s coffers in various ways including tax. That is why the World Bank estimates with 10% increase in internet connection, countries experience 1.3% economic growth.

The Ethiopian telecom industry may benefit from the new kind of management.  But in order for it to have a lasting effect and to catch up with the standard of other African countries, the private sector should be allowed to graze in these pastures.


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