Ethiopia's telecommunications sector has undergone significant transformation from a state-controlled monopoly to a more competitive market since 2018, driven by policy reforms, infrastructure investments, and the entry of new players like Safaricom Ethiopia. Key milestones include the 2019 Communications Service Proclamation establishing an independent regulator (ECA) and the 2021 Telecommunications Licensing Directive introducing multiple license categories. However, challenges remain in ensuring a level playing field, particularly regarding infrastructure access and market dominance by Ethio Telecom.
Broadband penetration has increased, with mobile subscriptions almost doubling between 2018 and 2024, but fixed broadband remains underdeveloped, and 4G coverage lags behind regional averages. The sector contributes significantly to GDP, employment, and tax revenues, with the ITU estimating a 10% increase in broadband penetration could add $193 million in tax revenues.
Despite these advancements,Ethiopia faces challenges in universal broadband penetration, network quality, affordability, and equitable access. EthioTel, the incumbent, maintains dominance in infrastructure and service delivery, creating barriers to fair competition. Safaricom Ethiopia, while expanding its market presence, struggles with high infrastructure costs due to reliance on leasing from EthioTel and EEP.
The report highlights several regulatory challenges and recommendations:
- Market liberalization: Facilitate entry of independent infrastructure providers (TowerCos and InfraCos) through revised licensing frameworks and cost-oriented pricing for infrastructure access.
- Addressing market dominance: Enforce competition laws to prevent anti-competitive practices like predatory pricing and ensure EthioTel operates on an even footing with new entrants.
- Digital financial services: Promote interoperability and diversity in the payment ecosystem by integrating all payment service providers into the national switch and enforcing open access policies.
- Investment incentives: Offer tax benefits, low-interest financing, and streamlined approval processes to encourage private sector investment, particularly in rural areas.
The report concludes that without addressing these challenges and implementing the recommended reforms, Ethiopia risks limiting the potential of its digital economy and deterring further foreign investment.
