Djibouti has confirmed that it will sell of a chunk of its incumbent telecoms operator, but questions remain over how attractive the asset will prove to would-be investors.
The government of the Republic of Djibouti on Sunday revealed that ministers had adopted a bill to allow the sale of state-owned enterprises, thereby paving the way for the partial sale of Djibouti Telecom.
The state did not specify how much of the telco will be up for grabs, but indications are that it will be a fair-sized minority stake. “The state will offer a minority and significant share of its shareholding to a leading strategic partner,” it said, in a French language statement. The state will retain a majority holding, it said.
It’s tempting to assume that international investors will come flocking, keen to pick up a slice of an incumbent telco in a growth market; the World Bank puts the number of mobile customers in Djibouti at close to 414,000 as of 2019, which represents under half of the population.
But there is not a lot of information in the government announcement – presumably we’ll have greater access to the T&Cs once the process actually gets underway; the country said it will carry out a competitive bidding process “with utmost rigour and transparency” aided by international consulting firms – and what there is suggests the state does not plan to cede any control of the telco.
“The State of Djibouti will be a majority shareholder and remain committed to the company, and will set out clear and ambitious specifications to the private partner,” its announcement reads. “The State of Djibouti is also committed to strengthening its capacity to regulate the sector and to ensuring that the nation’s strategic interests are safeguarded.”
It’s a fairly generic statement, but suggests that any new partner might not have as much say in the decision-making. Perhaps it’s one for a financial investor, rather than a telco.
However, there are carrots as well as sticks.
The state was keen to point out the telco’s various assets, which it claims offer a real, long-term view to the new investor. It listed the growth potential of the local market, its involvement in international and regional connectivity (it occupies a strategic position between the Red Sea and the Gulf of Aden, and plays host to numerous subsea cable landing stations), and the potential for the development of new activities, such as data centre operations and mobile money services.
That last point is noteworthy. Neighbouring Ethiopia recently sold off a new mobile licence to a consortium led by Safaricom, but failed to draw in international telcos in the way it would have liked due to its decision to bar the new licensees – two licences were originally up for grabs – from offering mobile money services. State-owned Ethio Telecom has a monopoly on mobile money, at least for now, and is making great strides in that area; earlier this week The Ethiopian Herald reported that Ethio Telecom’s Telebirr service has signed up 6 million customers in its first two months of operation.
Making the point that mobile money is an option in Djibouti was probably a deliberate move on the part of the government, since parallels are bound to be drawn between the two different markets.
Ethio Telecom is also on the block, the government having formally kicked off the process to sell a 40% stake a month ago. Like Djibouti, the market has low mobile penetration at around the 50% mark, but unlike Djibouti, it has a population of over 100 million people.
Djibouti could significantly increase access to mobile services – and that is indeed its goal – but we’re still only talking a few hundred thousand customers. According to the World Bank, Djibouti was home to just 988,000 people, as of last year.
There’s possibly the opportunity for a telco to build some regional scale by adding a Djibouti Telecom stake to its footprint, but as a standalone growth opportunity, Djibouti might not prove attractive to all.