ETC Still Losing Millions from Illegal Call Terminations in Ethiopia

Telecoms

Ethiopia’s incumbent ETC is losing over 80 million Br (US$8.9 million) to grey market operators despite the periodic crackdowns and arrest of these operators. In other words, even under a system of the harshest enforcement possible, the operator is still losing 14% of its potential revenues.

The sole telecom service provider gets more than 500 million Br per annum from incoming call terminations alone, which the Corporation delivers from the caller to the receiver.

After ETC revised its telephone tariff in January 2005, it reached agreements with overseas telecom companies whereby the state monopoly charges US0.23 cents per minute for an incoming international call as soon as it enters the borders. In 2006/07, ETC collected nearly 600 million Br in revenue rendering service for over 316.9 million international calls. In other words, the company lost almost 17 per cent of its international revenues in the current year.

The Corporation's total revenue from its services such as mobile, internet and landline was 2.7 billion Br, netting a profit of 777 million Br last fiscal year. However it is blaming the grey market for losses it made over the past two year.

Amare Amsalu, chief executive officer (CEO) of ETC, admits that the interceptions are interfering with service provision. "We know about the fraud but tracking down the parties involved might take time and patience on our part," Amare told Fortune. "However, we are doing our level best." The CEO does not agree with the over 80 million Br annual loss.

"It would not be possible for anyone to estimate the loss without having obtained the number of incoming calls being terminated before they reach us as well as the precise call durations," Amare countered. However, sources disclosed that ETC handles over 30 million of minutes of incoming calls each month and information about illegally terminated incoming calls can easily be obtained from one of the overseas telecom companies.

These sources confirmed that telecom companies in neighbouring countries, particularly Somalia, have installed satellite technology to detect and intercept incoming calls.

"We suspect the existence of individuals or companies that terminate calls both in Somalia and the Democratic Republic of Congo," Amare said. Though individuals and telecom companies terminate incoming calls from ETC's satellite from bases outside the country, once the calls crossed into the border of Ethiopia, there are individuals that transfer to the receivers from within the country, according to ETC sources.

Some experts in the telecom field believe that tracing the pilferages would not be a difficult task. However, the apprehension of those involved locally does not solve the problem until their international connections through which the illicit call termination business is based have been stopped, telecom experts explained. Another expert blames the illegal routing on the sector being monopolised.

"The high prices due to lack of competition create incentives to find alternative means to make cheaper calls," this expert told Fortune, citing market liberalisation as the best solution. "International companies selling phone cards can reap higher profits by routing through illegal termination points." In 2003, ETC claimed to have lost 62 million Br as a result of the interference it faced from illegal termination of calls.

At this time, a crackdown occurred on those allegedly applying V-Sats software to route calls. Members of the Federal Police Commission arrested 12 suspects following tips from ETC. An additional 14 employees of ETC were also arrested for alleged collaboration by technically assisting the process and providing many telephone lines used for termination. The Federal High Court acquitted these suspects, despite lawsuits filed against them following investigations by the commission.

Abdurahim Ahmed, communications affairs division manager at ETC, said that the jurisdiction and responsibility of controlling or inspecting would be for the Ethiopian Telecommunications Agency (ETA). "However, due to the Agency's lack of capacity, the Corporation is in the process of tracing the source of the activities," Abdurahim told Fortune.

Locally there is no discussion about ETC lowering its prices to compete with the grey market or that the company might be forced to compete in a liberalised market. The grey market is proxy competition and ETC is not doing very well in competing.