Ethiopia’s decision to exclude mobile money from the terms of two new telecommunications licences cost the government about US$500-million (R7-billion) from bid levels, Prime Minister Abiy Ahmed said.

The block imposed to allow the country to build its own expertise in phone-based financial technology will be lifted after about a year, Abiy said at the launch of Telebirr, a mobile payments service. Ethio Telecom, the state-owned operator, will run Telebirr.

“This decision has cost us a high price,” the prime minister said. “When it was decided to open up the telecoms market about two years ago, one of the key areas of contention was the issue of mobile money.”

The government has long been in the process of selling two new telecoms licences — a policy that’s at the heart of Abiy’s economic reform plan. The move will open up one of the last major markets yet to welcome international investors, and is intended to trigger a wider privatisation programme to raise foreign exchange and boost productivity.

The issue of mobile money has been vital to the progress of the auction. Fintech is a major revenue and profit driver for African telecoms operators, who are filling a gap left by traditional banks and taking advantage of soaring smartphone use.

‘Strong growth’

“Though Ethiopian mobile penetration lags behind peers, investment and lowered prices should lead to strong growth in take-up of mobile services,” Bloomberg Intelligence analyst John Davies said in a note. “The value to international investors depends on agreements with the government and how it chooses to regulate the market.”

Ethiopia has received a licence bid from a consortium including Vodafone Group, Vodacom Group and Kenya’s Safaricom. Another offer was made by MTN Group and China’s Silk Road Fund.