Vodafone Group’s plans to expand in Ethiopia have been complicated by the US state development agency’s decision to pause investments in the country, according to people familiar with the matter.
A group including the UK’s Vodafone, Safaricom and Vodacom Group were awarded a new mobile phone licence by the Ethiopian government on Saturday, and had agreed to take a US$500-million loan from the US International Development Finance Corporation to help with acquisition and development costs.
That part of the financing has been thrown into doubt over US economic sanctions against Ethiopia to end violence in the northern Tigray region, a conflict that has killed thousands of people and displaced many more. The state group is awaiting direction from the Joe Biden administration about how it should react in the longer term, said the people, who asked not to be identified as the information isn’t public.
Should that cash be permanently withdrawn by the DFC, the telecoms companies will have to source the cash elsewhere and at greater cost, the people said. However, there’s no indication the licence award is in jeopardy, they said, and the group expects to start services in 2022.
Vodafone declined to comment, while Vodacom and Safaricom didn’t immediately respond to requests for comment. The DFC didn’t respond to e-mails seeking comment.
The US decision may also affect funding from the World Bank and the International Monetary Fund to the country, people familiar with the matter said earlier.
Ethiopia’s award of a new telecoms licence paves the way to open the market of more than 110 million people to international investors for the first time, a key part of Prime Minister Abiy Ahmed’s economic strategy. The group pledged to invest $8.5-billion in their network over the next 10 years, including the $850-million licence fee. Other partners include the CDC Group, the UK equivalent of the DFC, and Sumitomo Corp.
Another partnership led by MTN Group, Vodacom’s Johannesburg rival, and the Silk Road Fund, a Chinese state investment group, was turned down after bidding $600-million. Ethiopia still intends to sell two licences, and said it will invite a new round of offers from international carriers after some policy adjustments.
The government is also looking to sell a minority stake in Ethio Telecom, the state monopoly. — Reported by Samuel Gebre and Loni Prinsloo, (c) 2021 Bloomberg LP