Strategic Management

Assignment 02

NAME OF THE COMPANY: ETHIO TELECOM

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Table of Contents
1. Background of the Ethio Telecom...............................................................................................1
2. Current Situation of Ethio Telecom.............................................................................................3
3. MISSION.....................................................................................................................................6
4. VISION........................................................................................................................................6
5. Objectives of Ethio Telecom.......................................................................................................7
6. Geographic scope of Ethio Telecom............................................................................................7
7. SWOT analysis on Ethio Telecom..............................................................................................8
8. Porter Five forces model analysis................................................................................................9

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1. Background of the Ethio Telecom

Historical background of Ethio telecom

The first telephone officially used in the world was in 1876 by Alexander Graham Bell. The first
telephones were brought by Ras Mekonnen from Italy in 1890, and connected between the
Palace and the Imperial treasury; the sound of disembodied voices frightened the local priests,
who thought it was the work of demons. The Emperor Menelik II responded to their protests
with disdain, and later used the telephone to give orders to his provincial governors tele
communications service was introduced in Ethiopia by Emperor Menelik II in 1894 when the
construction of the telephone line from Harar to the capital city, Addis Ababa, was commenced.

Telecommunication Sector in Ethiopia (1894-1942)

In this particular period, the telecom has been renamed and restructured through different stages.
1. Central Administration of Telephone and Telegraph System of Ethiopia (1890-1907): this
service was managed under the Imperial Court of Menelik II. The General Manager was
appointed to be Mr. Stevenin, a French citizen.
2. The Central Office of Post, Telegraph And Telephone (Ptt) System of Ethiopia (1907-
1909): It was administered by Emperor Menilik II’s Advisor, Mr. Al Fred Ilg, a Swiss
man.
3. Ministry of Post, Telegraph and Telephone (PT and T) (since 1910): First, it was
administered by Mr. Leo Shafno, a French citizen and then replaced by the first Ethiopian
administrators LijGizawBezabih, LijBeyeneYimer and their successors consecutively

Postwar Restoration (1942-1952)

After the independence from the Italian occupation, the re-established Ministry of PT and T took
over the running of Telephone, Telegraph and Radio communications. It, therefore, rehabilitated
the network of the whole country.

Under Imperial
The Imperial Board of Telecommunications of Ethiopia (IBTE) was established by the
proclamation No. 131 on October 15, 1952.

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The main purpose of the Board, as stated in its establishment charter of article 5 was
“to rehabilitate, extend, repair and maintain the telecommunication facilities of Ethiopia and to
engage in the business of telecommunication for profit.”
In 1960 IBTE looked after the operational matters of central Ethiopia, a Regional office was
created at Addis Ababa. And at the same time, Radio Division was created separated from the
receding Technical Division bringing the number of Division Offices to seven during the same
period.

Under the Dergue Regime (1974-1991)

At this period, the telecommunication services had made a major change of technology ranging
from Automatic to Digital technology.
Under the Dergue regime, the Ethiopian telecommunications was renamed as follows:
 In October 1975, the organization was renamed as “The Provisional Military Government
of Socialist Ethiopia Telecommunication Services”
 It was renamed again as “Ethiopian Telecommunications Authority (ETA) on January
1981. It retained its name as ETA up to November 1996.

Under The Dergue Regime (1974-1991)

The telecommunications sector was restructured and two separate independent entities namely
the Ethiopian Telecommunications Authority (ETA) and the Ethiopian Telecommunications
Corporation (ETC) were established by Proclamation No. 49/1996 on November 1996.
Under the supervision of the ETA, the principal duty of ETC is maintaining and expanding
telecommunication services in the country and providing domestic and international telephone,
telex, and other communication services.

Establishment of Ethio Telecom

As a continuation of the 2005/06-2009/10 five-year plan and after concentrating its efforts on
education, health and agriculture, the Ethiopian government has decided to focus on the
improvement of telecommunication services, considering them as a key lever in the development
of Ethiopia, Ethio telecom is born, on Monday 29 th November 2010, from this ambition of
supporting the steady growth of our country, within the Growth Transformation Plan (GTP),
with ambitious objectives for 2015.

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Liberalization of the Telecom Sector

Economic Reforms under Prime Minister Abiy Ahmed:

In 2018, Prime Minister Abiy Ahmed launched sweeping economic reforms to open key
sectors, including telecom, to private and foreign investment. This aimed to boost competition,
improve services, and attract foreign capital.

Partial Privatization of Ethio Telecom:

In 2021, the Ethiopian government announced plans to sell a 40% stake in Ethio Telecom to
private investors. A 45% stake would remain with the government, and 5% would be offered to
Ethiopian citizens.

Licensing New Competitors

In May 2021, the government awarded its first private telecom license to a consortium led by
Safaricom (Kenya), Vodacom (South Africa), Vodafone (UK), and CDC Group (UK). The
consortium formed Safaricom Telecommunications Ethiopia, which launched services in
October 2022. A second license was planned but delayed due to regulatory and geopolitical
concerns.

2. Current Situation of Ethio Telecom

Ethio Telecom, Ethiopia's state-owned telecommunications operator, is navigating a

transformative period marked by increased competition, technological advancements, and
regulatory changes. Below is a detailed analysis of its current situation:

1. Market Position and Competition

 Monopoly to Duopoly Transition:

For decades, Ethio Telecom held a monopoly over Ethiopia's telecom sector. However, in 2022,
the government introduced competition by awarding a license to Safaricom
Telecommunications Ethiopia, a consortium led by Kenya’s Safaricom. This ended Ethio
Telecom’s exclusive control and ushered in a duopoly.

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  Market Share:

Ethio Telecom remains the dominant player, serving over 70 million subscribers (as of 2023),
accounting for approximately 70-75% of the market. Safaricom Ethiopia, which launched
services in October 2022, has rapidly gained traction, targeting a 25% market share by 2025.

 Impact of Competition:

The entry of Safaricom has driven down prices, improved service quality, and accelerated
innovation. Ethio Telecom has responded by enhancing its offerings and customer experience
to retain its market leadership.

2. Financial Performance

 Revenue Growth:

Ethio Telecom remains a significant revenue generator for the Ethiopian government, with
annual revenues exceeding $1.5 billion (2022 figures). However, growth has slowed due to
increased competition and economic challenges, such as inflation and foreign exchange
shortages.

 Profitability:
Despite revenue pressures, Ethio Telecom has maintained profitability, thanks to its large
subscriber base and diversified services. However, margins are shrinking as it invests
heavily in infrastructure and marketing to compete with Safaricom.
 Debt and Investment:

The company has relied on loans and partnerships (e.g., with Huawei) to fund its expansion.
While this has enabled rapid infrastructure development, it has also increased its debt burden.

3. Infrastructure and Technological Advancements

 Network Expansion:

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 Ethio Telecom has significantly expanded its 4G LTE network, covering major cities like
Addis Ababa, Dire Dawa, and Hawassa. It aims to achieve 95% 4G coverage nationwide
by 2025.

 5G Pilot Projects:

In collaboration with Huawei, Ethio Telecom launched 5G pilot services in Addis Ababa in
2022. Full-scale 5G deployment is expected by 2024-2025, positioning Ethiopia as a leader
in next-generation connectivity in Africa.

 Fiber Optic Backbone:

The company has invested heavily in its fiber optic network, which spans over 20,000
kilometers, connecting urban centers and supporting high-speed internet services.

4. Services and Innovations

 Mobile Money (Tele Birr):

Launched in May 2021, Tele Birr has become a game-changer for financial inclusion in
Ethiopia. By 2023, it had over 32 million users, making it one of the largest mobile money
platforms in Africa.

 Digital Services:

Ethio Telecom has expanded its digital offerings, including e-commerce platforms, cloud
services, and IoT solutions, targeting both individual and enterprise customers.

 Customer-Centric Initiatives:

To retain customers amid competition, Ethio Telecom has introduced affordable data
bundles, improved customer service, and loyalty programs.

5. Challenges and Risks

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Competition from Safaricom:

Safaricom’s aggressive pricing and brand recognition pose a significant threat to Ethio
Telecom’s market share.

Regulatory Constraints:

The government retains control over critical infrastructure (e.g., towers, fiber optics), requiring
private operators to lease capacity. This limits Ethio Telecom’s flexibility and increases
operational costs.

Economic Pressures:

Inflation, currency devaluation, and foreign exchange shortages have impacted Ethio Telecom’s
ability to import equipment and expand services.

Political and Geopolitical Risks:

Ongoing conflicts (e.g., in Tigray) and geopolitical tensions (e.g., U.S.-China rivalry) have
created uncertainties for the telecom sector.

3. MISSION
1. Connect Ethiopia through state of the art telecom services
2. Provide high quality, innovative and affordable telecom products and services that
enhance the development of our nation and ensure high customer satisfaction
3. Build reputable brand known for its customers’ consideration
4. Build its managerial capability and man power talent that enables Ethio telecom to
operate at international level
5. Support community and environmental development

4. VISION
 To be a world-class telecom services provider.

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  To be committed to understand, meet and exceed the telecommunication needs and
expectations of country at large and customers in particular.
 To be a center of advancement of ICT, via research, innovation, transfer, diffusion,
adaptation, integration and dissemination in Ethiopia and in particular and East/Horn of
Africa in general.

5. Objectives of Ethio Telecom

 Being a customer focused company Leverage to achieve goals.
 Focus on customer service by ensuring easy access and coverage to the whole
population.
 Offering the best quality of services.
 Building a financially sound company and Meeting world class standards.
 Develop and enhance Network and Information systems.
 Develop Human Resources management and create a strong brand image.
 Implement & control standard processes for better Financial, Sourcing & Facility
processes.

6. Geographic scope of Ethio Telecom

Ethio Telecom, Ethiopia's state-owned telecommunications provider, has been actively

expanding its network infrastructure to enhance connectivity across the nation. As of May 2024,
the company has extended its 4G LTE mobile internet service to 417 cities, enabling customers
to access high-speed data services.

In addition to the 4G expansion, Ethio Telecom has been rolling out 5G services. By November
2024, 5G networks were launched in cities including Addis Ababa, Adama, Jigjiga, Dire Dawa,
Harar, Bahir Dar, Hawassa, Wolaita Sodo, Hosaena, Arba Minch, and Bishoftu. The company
plans to extend 5G services to 15 more cities by the end of the fiscal year.

Ethio Telecom's strategic initiatives aim to bridge the digital divide between urban and rural
areas. The company plans to construct 1,298 new mobile sites, expand 4G services to an

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additional 500 cities, and introduce 5G services in 15 more cities during the current fiscal year.
This includes establishing 331 rural connectivity solutions and 165 mobile network sites to
enhance network coverage in 1,000 rural kebeles.

Through these efforts, Ethio Telecom is working to provide comprehensive telecommunications

coverage across Ethiopia, ensuring that both urban and rural communities have access to modern
digital services.

7. SWOT analysis on Ethio Telecom

Ethio Telecom, Ethiopia's state-owned telecommunications provider, has a significant presence

in the country's telecom sector. Here's a SWOT analysis highlighting its strengths, weaknesses,
opportunities, and threats:

Strengths:

 Market Dominance: Historically, Ethio Telecom held a monopoly in Ethiopia's

telecommunications market, serving a vast customer base.
 Extensive Network Infrastructure: The company has developed a comprehensive
network infrastructure, providing widespread coverage across the nation.
 Government Support: As a state-owned enterprise, Ethio Telecom benefits from
substantial government backing, facilitating large-scale projects and expansions.

Weaknesses:

 Service Quality Challenges: There have been concerns regarding the consistency and
quality of services provided, leading to customer dissatisfaction.
 Limited Innovation: The absence of competition during its monopoly may have
contributed to slower innovation and responsiveness to market demands.

Opportunities:

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  Digital Transformation Initiatives: Ethio Telecom has launched a three-year growth
strategy named "LEAD" to accelerate digital transformation and enhance service
offerings.
 Market Liberalization: The Ethiopian government's move towards liberalizing the
telecom sector presents opportunities for Ethio Telecom to innovate and improve services
in a more competitive environment.

Threats:

 Emerging Competition: The entry of new players, such as the Safaricom-led

consortium, introduces competition that could erode Ethio Telecom's market share.
 Regulatory Changes: Shifts in government policies and regulations could impact Ethio
Telecom's operations and market position.

By leveraging its strengths and addressing its weaknesses, Ethio Telecom can navigate the
evolving telecommunications landscape in Ethiopia and capitalize on emerging opportunities.

8. Porter Five forces model analysis

Ethio Telecom, Ethiopia's state-owned telecommunications provider, operates within a unique

market environment. Applying Porter's Five Forces model offers insights into the competitive
dynamics it faces:

1. Threat of New Entrants:

 Market Liberalization: Historically, Ethio Telecom held a monopoly in Ethiopia's

telecom sector. However, recent government initiatives to liberalize the market have
paved the way for new entrants, such as the Safaricom-led consortium. This shift
increases competitive pressure and may challenge Ethio Telecom's market share.

2. Bargaining Power of Suppliers:

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  Infrastructure Dependence: Ethio Telecom relies on international vendors for
equipment and technology. This dependence can limit bargaining power, especially if
suppliers are limited or possess significant market influence.

3. Bargaining Power of Buyers:

 Limited Alternatives: With the market previously under monopoly, customers had
minimal choice, reducing their bargaining power. As competition emerges, consumers
will gain more options, potentially increasing their influence over service providers.

4. Threat of Substitute Products or Services:

 Technological Alternatives: The rise of alternative communication platforms, such as

satellite internet providers and over-the-top (OTT) services like WhatsApp and Skype,
presents substitutes that could diminish demand for traditional telecom services.

5. Industry Rivalry:

 Emerging Competition: The entry of new players intensifies industry rivalry. Ethio
Telecom must enhance service quality, innovate, and adopt competitive pricing strategies
to maintain its position.

In summary, while Ethio Telecom has benefited from a monopolistic position, market
liberalization introduces new competitive dynamics. The company must adapt to these changes
by leveraging its established infrastructure and focusing on customer-centric strategies to remain
competitive.

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