TOKYO – Sumitomo Corp. will offer mobile services in Ethiopia as part of a consortium with UK telecommunications provider Vodafone Group, becoming the first Japanese company to enter the market in Africa.
Ethiopia has approved a license for the consortium to provide mobile services in the country. The consortium, which also includes CDC Group, a British specialist in development finance, will create a joint venture. Sumitomo is expected to hold a stake of just under 30%.
Spending is expected to reach $ 8 billion over 10 years, including capital investments for base stations. Services are expected to start in 2022. The Japanese government is supporting the initiative, the US International Development Finance Corp. being likely to provide funding as well.
Africa’s telecommunications infrastructure contains a high percentage of Chinese equipment – such as Huawei Technologies and ZTE – which have been cited for potential security risks. Japan, the United States and the United Kingdom, concerned about the continuation of the trend, have contacted Ethiopia about the participation of the consortium.
Ethio Telecom, a state-owned enterprise, has dominated the sector in Ethiopia. The partial privatization of the company began in 2019, as the government decided to open up the wireless sector to competition. Submissions were solicited the following year and the window closed last month.
The plans called for the licensing of no less than two entrants, and other companies have made offers. But only the UK-Japan consortium was selected.
“This will be the biggest IDE [foreign direct investment] in Ethiopia to date, ”Ethiopian Prime Minister Abiy Ahmed said in a tweet.
Ethiopia is one of the largest countries in Africa, with 112 million inhabitants. With mobile phone penetration in the country only reaching around 40%, the consortium sees an opportunity for growth.
The selection also represents the first project under the strategic partnership between Sumitomo and Vodafone concluded in November. In addition to the mobile service, the group plans to deploy offers in areas such as digital currency, education and medical IT.
China has sought to establish a digital Silk Road, based on its own internet network, as part of the broader Beijing Belt and Road infrastructure initiative. Among the overseas projects undertaken by Chinese companies from 2006 to June 2020, nearly 40% were in sub-Saharan Africa, according to Mizuho Research & Technologies.
“Huawei manages 70% of Africa’s 4G network,” said Yoshino Tamai of Mizuho Research.
The selection of the Vodafone-Sumitomo consortium increases the likelihood that equipment from Japanese companies such as NEC and Fujitsu will be used.
“We will also be able to provide an overview of the privatization of [Nippon Telegraph & Telephone]A Japanese government official said, referring to the country’s telecommunications giant, which was previously wholly state-owned.