MERGERS, ACQUISITIONS AND FINANCIAL RESULTS

Ethio Telecom Seeking New Vendor Financiers for Expansion

Ethio Telecom, the country's sole telecommunications provider, is seeking a new round of financing as it ramps up expansion plans geared towards meeting the telecommunication sector development goals set out in the GTP.

In a tender issued on June 7, 2011, interested international suppliers were invited to submit expressions of interest (EoI) for the turnkey expansion of Ethio Telecom's network, based on a vendor financing scheme.

Some companies have already shown interest, including Ericsson, Nokia, ZTE, and another Chinese firm, sources at Ethio Telecom disclosed to Fortune.

Officials at Ethio Telecom declined to comment.

Ethio Telecom hopes to raise the number of mobile phone subscriptions from 6.5 million to 50 million, mobile telephone coverage from 8.7pc to 45pc, the number of Internet subscribers from 187,000 to five million, and wireless telecom service coverage from less than 50pc to 90pc by the end of the 2014/15 fiscal year, according to the tender document.

This is the second time Ethio Telecom, formerly Ethiopian Telecommunications Corporation (ETC), has sought foreign vendor financing. In 2006, ETC signed a contract worth around 2.4 billion dollars with three Chinese companies to help upgrade and expand the country's telecommunications services.

A total of eight companies, including Siemens, Nokia, Alcatel, and Ericsson, participated in the bid. Ultimately, it was ZTE, Huawei, and China International Telecommunication Construction Corp (CITCC) that won the bid.

The three Chinese companies agreed to help ETC extend its fibre cable network from 4,000km to 10,000km before 2010, according to their contract. The strategic plans also included increasing the number of mobile subscribers from 1.5 million to seven million and expanding the fixed line telephone network capacity.

ETC had chosen vendor financing due to the size and complexity of the planned projects, it said at the time.

As the supplier is also the financier under a vendor financing scheme, it allows telecom equipment suppliers to supply goods and services as they are required by projects.

The Ethiopian government has earmarked 21.7 billion Br as part of its off budget financing for telecom development in its ambitious five-year GTP.

Out of a pool of five companies, FT and MTN passed the technical evaluation, beating three other telecom companies. Following its successful bid, telecom giant France Telecom (FT) took over the management of ETC, forming Ethio Telecom, a new company, in November 2010.

Ethio Telecom is 100pc owned by the Ethiopian government and will be managed by FT for two years. As part of the agreement with the government, FT will be paid 42.3 million dollars for managing Ethio Telecom and the government is also paying the salaries of FT's 24 employees heading the management of Ethio Telecom.

The telecommunications provider's bid opens on July 8, 2011.

Source: Addis Fortune

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