Ethiopia: Auction Model Favoured to Choose Telecom Entrants

The macroeconomic committee, which is overseeing the ongoing liberalisation and privatisation processes of state enterprises, is expected to choose the auction model, which will be used to decide which two telecom operators will join the industry within six months. Hybrid, beauty contest and full auction are the three proposed options.

The proposed full auction model uses pricing as the primary piece of criteria to screen the bidding companies. Under the full auction, there are two alternatives, single and multi-round auctions. With the single auction method, two companies that offer the first two highest prices will secure licenses. In contrast, the multi-round auction consists of two rounds of sealed technical and financial offer submissions of the bidders.

The second proposed option, beauty contest, takes other parameters and factors such as a corporation's track record and previous experiences of bidders into accounts on top of prices. The last model, the hybrid auction combines full auction and beauty contest. It follows stringent qualifications criteria to narrow down candidates before jumping into the main bidding process that includes technical and financial evaluations.

The macro team, which already deliberated on the proposed models, will soon pass a decision, according to Eyob Tekalign (PhD), state minister for Finance.

"Based on the decision, we'll then float the bid this month," he said.

For an expression of interest that was announced in May, a total of 11 companies have submitted complete proposals. Out of the companies that expressed interest, nine of them are telecom service providers, while the remaining two are companies engaged in telecom-related services.

"This shows us there is significant interest from multiple companies," said Eyob.

The Ethiopian Communications Authority, which was established to regulate the telecommunications service providers, will send a request for qualification (RFQ) this month, according to Eyob. The RFQ is set to stay open for 40 to 50 days.

"We expect to finalise the entire process and issue the licenses by February," said Eyob.

The macroeconomic committee is delegated by the Council of Ministers to handle the privatisation of state-owned enterprises and the liberalisation of some sectors. The Council has approved the detailed guidelines and procedures after the then Ethiopian People's Revolutionary Democratic Front (EPRDF) passed the decision to privatise the state-owned enterprises two years ago.

Under the macro team, a steering committee composed of ministers and different technical committees for each sector were established to follow up on the process.

Last year in August, Prime Minister Abiy set up a privatisation advisory team that has 21 members from government, the private sector, academia, international institutions and the diaspora community. The team is in charge of advising the government on the process of privatising state-owned enterprises.

As part of the liberalisation and privatisation process of the telecom sector, the government also formed the Ethiopian Communications Authority last year as an independent regulatory body. Since its establishment, the Authority has been rushing to prepare before the two companies join the industry by working on its organisational structure and preparing legal frameworks.

So far, it has prepared 16 directives. Of which, seven of them have been tabled to the board of the Authority for approval, where five are already under a consultation process. The remaining four are finalised and are expected to be availed for public consultation soon.

The Authority along with the Ministry of Finance hired the International Financial Corporation (IFC), a wing of the World Bank, as a transaction advisor of the liberalisation process. Recently, IFC has submitted the final draft of spectrum valuation, which is under scrutiny by the government and independent experts.

"We tried to triangulate the submitted document by different experts to get the proper value from the transactions," said Eyob.

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