Mobile in Ethiopia

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December 2016

Digital ResourceMSEDGSMA Capacity Building

Aynalem Aregawi (Mr./Eng.)Senior Standards & Regulation ExpertMinistry of Communication and IT, Ethiopia

Mobile is transforming Africa’s economy and society. This is an attempt to briefly assess the case of Ethiopia in line with the course format of MSED.

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Telecommunication Sector in Ethiopia

Surprisingly, Ethiopia is an early adopter of the telephone and telegraph.

Telephone was introduced in 1894 which is only 17 years after Alexander Graham Bell’s famous trial of the phone.

Telegraph was introduced along the Ethio-Djibouti rail in 1897.

In adopting Mobile, Ethiopia trails some African countries, but is among early adopters.

Mobile was first rolled out in 1999 in the capital Addis Ababa with a subscriber capacity of 40,000.

Its growth has been slow compared to Other African countries. However, recently, with massive investment and reorganization, it has scored impressive improvements in coverage, subscriber number, generation of technology, offered services, customer care, etc.

However, the mobile sector performance is still lower than many African countries in the development level of its ecosystem, and in its ability to drive growth of the digital economy of the nation.

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Mobile SectorThe market structure of Ethiopian communication sector is monopoly. ethio telecom is the monopoly network operator(MNO).

It describes itself as an ‘Integrated Telecommunication Solutions Provider’. It provides mobile, fixed, internet services.

ethio telecom launched ⁻ 2G (GSM900) in April 1999,⁻ 3G (WCDMA & HSPA 2100) in January 2009, and⁻ 4G (LTE 1800) in March 2015

Its aggregate mobile network area coverage has now reached 92% of the country. The population coverage is even higher than this and is close to 100%.

The subscriber number has been growing at a rate of 49% CAGR for the last decade. It reached 38.8m in 2015 [National Bank of Ethiopia]

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Mobile Sector-Continued

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The Mobile Ecosystem There is no strong collaboration and coordinated (symbiotic) evolution among the mobile ecosystem components. However, the following businesses could be considered constituting the ecosystem.

Following the MNO, The second most visible component of the mobile ecosystem are handset manufacturers or more precisely assemblers.

There are now 8 mobile assembly plants in the country, out of which three-Tecno [TV Report of Expansion] , Tana and Smadl- are the dominant ones.

Companies that specialize in Software development are less than 500. Further, those that have proven mobile native or hybrid development capabilities are even less.

An emerging trend of collaboration between handset manufacturers and developers is the mobile App challenge like the one sponsored by Tecno.

mobile retailers: according to the operator there are 75,000 device and accessory retailors all over the country.

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Contribution of Mobile to the Economy

The government is the sole owner of the MNO. As a result the total revenue of the company is appropriated by the government and used to finance development projects.

Direct contribution of the MNO hovers around 1.6% of GDP. This is not far from the aggregate contribution of MNO for Sub-Sharan Africa which was 1.7% in 2016.

Official account for the contribution of other components of the mobile ecosystem is not available.

Similarly, official account for the indirect contribution of the mobile industry through productivity enhancement and innovation is not available. A look at the aggregate for SSA from the GSMA Mobile Economy Report 2016 (p32) indicates that it is significant and by far higher than the direct contribution. (See also side fig.)

Qualitatively, it can be assumed that the indirect contribution of the mobile industry in Ethiopia would be higher than the direct contribution

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Contribution of Mobile to the Economy – Cont’d

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Mobile Access and Regulation Due to the monopoly market structure, the MNO in Ethiopia faces little regulatory hurdles. The policy objective is also supportive of telecom infrastructure development.

However, the MNO is dependent on foreign aid to finance its investments. It also depends on turnkey arrangements by foreign firms as it lacks the technical and managerial capacity to run its projects.

The MNO lacks the incentive for efficiency and innovation that comes from competition.

Mobile voice tariff in Ethiopia is among the lowest in Africa. On the contrary, internet tariff is substantially higher. Especially on PPP basis.

As mobile broadband (MBB) is becoming mainstream with growing utility, the MNO and other components of the mobile ecosystem need to address the affordability of mobile internet and smartphones.

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Mobile Services•There are several initiatives in almost every sector of the economy and social services. But except for mobile financial services and mFarm, none has emerged with definite success and visibility.

•A partial list of Mobile services and applications may include⁻ Financial Sector - M-Birr, HelloCash, Bank Owned Mobile Banking⁻ Agriculture Sector - ECX mFarm, EATA various initiatives⁻ Education Sector - National Exam Result , High school mobile education management system,

etc.⁻ Health Sector - maternal information delivery, Health Agents Education, etc.⁻ Labor Market– mEmployment (mJobs)⁻ Etc.

• Substantial number of mobile services (or other ICT solutions) are initiated mainly by foreign NGO’s.

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Mobile Financial ServicesFinancial services of any kind are restricted to financial institutions only (meaning banks and microfinance institutions)

However, according Directive No. FIS /01/2012[NBE] which regulates ‘Mobile and Agent Banking Services’, financial institutions can procure the technological services from a third party and provide mobile banking

As a result some banks have their own mobile banking service while others use a service provider to provide mobile banking service.

There are now two successful mobile banking technology service providers: M-Birr and HelloCash.

M-Birr plans to reach #### agents and 1.5 million active accounts by 2016

HelloCash estimates to build a customer base with active accounts of 2-3 million by 2016 and 10 million by 2018.

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Mobile Financial Services OPPORTUNITIES AND STRENGTHS

Interoperability between different financial institutions enables smooth transaction between the unbanked and the banked.

No major intrinsic problem has been reported. This will enhance the confidence of financial sector stakeholders on the technology.

Existence of competition in MFS is good for efficiency and innovation.

The financial regulator, NBE, has built on best practices in MFS in its directive including (KYC, Tx Limit, etc.)

Mobile subscriber number is growing at high double digit figures. Similarly, Mobile geographical cover which is practically 100% would create huge potential market for the service providers.

CHALLENGES

Weak digital culture promotion in the country may not drive rapid adoption of mobile financial services.

Lack of continuous and proactive collaboration within the mobile ecosystem is also reflected in mobile financial services.

Mobile financial service has huge potential as the country goes forward in digitalization. The financial regulator, NBE, does not however publish separate data and report on MFS. That makes it difficult for industry researchers and other players.

It is not clear whether the regulator is ready and has a working mechanism for the review and update of regulatory issues in the MFS

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mAgriculture Various technologies are implemented in the agriculture

sector that are based on mobile. To enhance productivity, and benefit smallholder farmers.

One developed by the exchange market called ECX has been lauded as successful by several experts.

This application uses mobile IVR, SMS and website to provide live market information to farmers.

About 60,000 farmers use the App daily [GSMA mFarm].

Overall, 1.365 million farmers have subscribed to the service.

The App is initiated and developed by ECX in cooperation with USAID & Melinda Gates Foundation.

It aims to benefit farmers set their price right and avoid middlemen. Earning good price is also expected to be an effective incentive in enhancing farm productivity.

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Other Mobile ServicesMGOV

Mobile Apps for 20 government offices were specified by the Ministry of Communication and Information Technology and a contract awarded to a private company called Avado.

This is a decisive move by the government to employ the advantage of mobile prevalence for the benefit of citizens.

Some of the existing eGov services also function on mobile. But dedicated mobile Apps have the advantage of better performance both on mobile and desktop.

Developments of mobile governance or mGov is bound to expand in the future.

To produce impact on the socioeconomic progress of the country, the government needs to ensure reliable operation of the platforms & avoid frequent unavailability.

MLEARNING / MEDUCATION

The governments main thrust has been to ensure 100% basic education enrollment through traditional school expansion. To date the nation has achieved basic education net enrollment of 80%+.[Ministry of Education]

Thus there is no big scale mLearning development.

However, many private schools and the government use several mobile based education management services. In addition, evaluation of the education sector lists some major challenges such as teacher quality, teaching material shortage, etc. Mobile can help overcome this problems. Thus the government should give due attention to mLearning services development.

The national examination agency has for example deployed an SMS App for result notification. That has been particularly useful to people in remote areas to easily and instantly know their results and get ready to the next level.

Other Mobile ServicesMHEALTH

A number of services are initiated in the health sector which are either public sponsored or market oriented

One good example is the maternal advise provided through mobile. This pilot project was initiated by Dutch Health[e]Foundation and TTC Mobile in cooperation with Ministry of Health and Medical Professional Associations. Initially, it planned to reach 4,000 expectant mothers.

Maternal health is one of the priority policy areas because of international commitments and national goals.

Market oriented health advisory services provide medical advise for a certain charge by calling with a short code 8896 on the mobile. One example is HelloDoctor.

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Conclusion and Recommendation

As the foregoing discussion point out, Ethiopia is slowly but surely moving towards digitalization. To meet its own development goals and to be a respectable part of the future, for digital is the future, it needs to accelerate its digitalization.

Facts on the ground clearly show that Mobile is the indispensable and in some cases irreplaceable platform for digitalization in Africa including Ethiopia. Therefore, the government should pivot on mobile.

In line with this, the government should promote digital culture of the public proactively to accelerate mobile services uptake.

On the supply side, the government has to promote collaboration and linkage among the various components of the mobile ecosystem.

To match at least the SSA aggregate contribution of MNO to GDP, ethio telecom should strengthen its infrastructure upgrade and expansion with clear goals of broadband coverage.

The ICT industry structure, mobile based or otherwise, favors capability more than number. However, it is important to foster local entrepreneurship in all components of the mobile ecosystem.

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Thank You

ACKNOWLEDGEMENTI would like to thank my course leader Julia Burchell, Senior Insights Manager, Mobile for Development Program at the GSMA; and my course moderator Andrea Guajardo, Engagement Manager for the Capacity Building program at the GSMA. Their assistance and direction has been valuable in the preparation of this material and during the course.

I would also like to thank my course mates from the regulators and related industries of Tanzania, Kenya, Côte d’Ivoire, Turkey, India, Pakistan, and Philippines. I have benefitted from their questions and opinions in the live sessions of the course.