The Pros and Cons of Privatising ETC

By Berhe Hagos

ETC traces its history back to 1894 when the first lines of communication were introduced in Ethiopia by Atse Menelik. For next 100 years developments were rather stagnant and not very visible. It was only when the present government incorporated ETC that the fast track of development begun to be noticeable. As late as 1994 the total land line comprised less than 100K lines. Today the figure is ten times that. Mobile operations commenced with a capacity of 30k lines 1996, which was seen as the most important milestone in the history of ETC. And today, eleven years since that commencement the capacity is near a million lines.

Despite being the first country in Africa to introduce telecommunications, Ethiopia has always been slow to take up with other nations. However the present government’s efforts should be recognized and appreciated for leapfrogging to fill the gap created during all years.

The Board has been faced with many challenges in transforming the incumbent monopoly to a market oriented modern telecoms company. It has to do with changing the organizational structure and changing the mindset of the management and employees. This process is still on going and to some in the administration and employees it has been hard and difficult. Some are adapting to the staked plan, others are falling out and have the feeling of being dejected.

These challenges have resulted in a number of structural changes at the top level management. Changing management frequently results in a vicious circle. The new comers are suspicious, and frightened of failures and meeting the same fate as their predecessors. They become paralysed and may be indecisive. This can also create a risk and the temptation for corruption. If one knows that the life cycle of the appointment is going to be short (between one to three years in the case of ETC) then one is prone to temptations. The Board must be very active and in certain issues operational in order to stay well informed. If it dose that it can be accountable for the performances and cleanliness of the top management. Hence the Board cannot change the top management under the excuse of being deceived or surprised.

The top management is also faced with many contradictory challenges. On the one hand the management is expected to transform the company in to a world class operator with full-fledged market orientation, best class of customer service, on the other hand they are supposed get committed fully in the race of covering the whole country and increasing the penetration rate to ten fold. It is very difficult for an incumbent in monopoly to be market oriented. The lack of a serious challenge, namely a competitor makes it even harder to get motivated to initiate and drive the principles of market orientation.

I am all in favour of deregulating telecommunications in Ethiopia, and would like to see ETC challenged in certain areas. This is already happening to some extent, but it can be developed to an extent where ETC dose not have any control or monopoly, but would be just another player in competition with the several private telecommunication service providers.

A good example is the introduction of Mobile Virtual Network Operators in Ethiopia, with ETC acting as the network provider and the Agency regulating the market. But to start with, the government must consider this option and give an assignment to the agency to develop a world class policy for handling the wholesale of network capacity by the dominant monopole and the MVNOs. The MVNOs will market and sale the services in competition with ETC. This will make ETC more dynamic and focused. It will use its force task to implement the expansion of the networks and there by fulfil its commitment to the government to give access to all underprivileged rural areas.

Another challenge for the top management has been the hiring of so called “international consultants”. I wonder how many Business & Strategy plans have been developed over the last few years. I also wonder how many of these plans were implemented. Many such plans are often developed by International Consultants who hire expatriates from their respective countries to draft the plan. Many such consultants are often retired people, or inactive in their own countries, and to some extent obsolete when it comes to state of the art technology.

Gone are the days when big operators like Swedish Telecom had their own consultancy division. Many companies once affiliated to these operators in the past try to appear as if they still are affiliated to their old organization, and even use old documents when biding to give that impression. In fact I have met consultants that believe their task is to discipline and make the Ethiopians do the job. This has in some cases created a conflict, contracts were cancelled, and the consultant sent home. I have also seen consultants who contact other network providers in order to make a cut and paste solution. There are also those consultants whose only interest is on how to prolong their contract. As long as one hires expatriate consultants, whose only interest is money, one cannot really expect an honest and clean job to be done.

Some have commented that the Government discredits the private sector and that is why it is unwilling to privatize. On the contrary, I think the government does recognize more than ever the significance of involving the private sector and of gradually privatising many State owned companies. The most empowered and effective ministry is the Ministry of Trade and Industry. More than 200 State owned enterprises have so far been privatised over the last few years.

The fact that there is a resistance to privatize ETC at the present time has its own special reason. Ethiopia is not only Addis Ababa. The population and geographic coverage of the mobile network is today unsatisfactory. The government sees access to ICT as the most important element in the poverty reduction process. By 2010 to 2012 there should be access to mobile service by at least 65% of the population and the penetration rate should reach up to 9%. The number of broadband and dialled access must reach the rural areas and must increase by many folds. All this will be financed by ETC.

In other words, one can say ETC is the cash cow that will finance the ICT development in the country. A cash cow can become old and die therefore, ETC needs a continuous renewal. The challenge is new markets and new sales areas by the private sector and a modern and new technology strategy. ETC can leapfrog easily by migrating from existing infrastructure to new ones converging telecom, IT and media. This will enable ETC to make significant savings in both Capex and Opex. For this purpose ETC needs to have a long term agreement with trustworthy vendors.

European vendors have not made significant contribution, partly because they lack financial funds. The MOU between ETC and ZTE should be welcomed as long as the agreement is long term and covers all aspects for the future. The fact that ZTE had problems with the installed base in Addis Ababa has its own history. ZTE was trying to be the third vendor integrating its own systems to the two legacy systems that were not cooperative in the process. My suggestion is a pre study must be run to substitute all the MSC´s by a soft switch from one vendor. The loss of invested money will be rewarded by the decrease in OPEX and the future expansion CAPEX.

Engineer Berhe Hagos works with TeliaSonera in Sweden, as Director for the development of new services and was instrumental in the introduction of Mobile communications in Ethiopia .

Berhe.Hagos@teliasonera.com