Both MTN and Vodacom see potential for growth in the Ethiopian market, which this week opened to foreign investment after decades of state control.
"MTN has long held the view that Ethiopia offers great opportunities for growth, both for the people of Ethiopia and for the businesses that could serve them, through the liberalisation of the telecommunication market in that country," an MTN spokesperson told ITWeb via e-mail.
"MTN is excited by the potential opening up of the Ethiopian market as it would be a natural fit for MTN's existing and extensive Pan-African footprint."
This after Ethiopia's government on Tuesday said it would allow private domestic and foreign investment in state-owned telecoms, aviation, shipping and power companies. This was a major policy shift from Ethiopia's new prime minister, Abiy Ahmed, that analysts believe could loosen the state's grip on the economy.
The Horn of Africa nation has a population of around 100 million people, making it Africa's second largest nation, after Nigeria, and an appealing market in which to offer mobile and fixed-line services.
"Vodacom has said on many occasions that Ethiopia is an attractive market so it follows that there would be interest. Naturally, this is dependent on what might become available and if it fits within our investment parameters," the telco told ITWeb via e-mail.
According to Reuters, the economic reforms come two months after Abiy took power, promising political changes to address growing anger among the youth over unemployment and ethnic marginalisation.
Meanwhile, companies have been waiting in the wings for Ethiopia to open its state monopolies and although it's still early days, operators like MTN say they are encouraged by the government changes.
MTN has had a representative office in Ethiopia for a number of years and has had a value-added services licence in the country since 2013.
"MTN's licence to provide value-added services in Ethiopia was recently renewed and we continue to maintain an office in Addis Ababa. Ethiopia presents many exciting telecommunication opportunities and we look forward to further discussions with that nation's authorities on potential partnerships and opportunities," the telco says.
MTN operates in 22 countries across Africa and the Middle East, and Vodacom operates in five African nations.
George Kalebaila, director for telecoms and Internet of things in Africa at IDC, says Ethiopia has for some time been on the radar of most telcos, especially MTN and Vodacom, "as it represents the last biggest telecoms opportunity in Africa which has until now been a government regulated monopoly".
"It has a huge population and the economic growth rate has been one of the fastest in Africa. There is also huge spending on infrastructure projects across the economy. Opening the telecoms market will definitely contribute to accelerating economic activity," says Kalebaila.
However, it remains unclear whether the Ethiopian government will consider issuing licences to foreign mobile operators; rather, it seems the current plan would be to allow minority stake ownership in government-owned Ethio Telecom.
Africa Analysis director Dobek Pater says this may limit the opportunity for outside operators, as it falls short of permitting full competition.
"One of the problems is government will retain majority shareholding, which means they retain control. Most telcos would ideally want to have a majority shareholding so they could shape the decision-making of the company. However, if MTN or Vodacom had the opportunity to manage and help grow the company and shape its strategy, then they would probably be interested," Pater believes.
Kalebaila agrees it will depend on the extent to which government wants to liberalise the telecoms market.
"Do they want to retain a controlling stake in the privatised entity or do they want to invite new players to launch new services? Of course, the latter option will be more appealing to the likes of MTN and Vodacom, and also might be the best way to accelerate transformation of the telecoms market and open it up to more competition. However, it may be the former which will still maintain a monopoly but at least leverage the expertise and capital investment from the successful bidder," says Kalebaila.
He says a successful bidder might want to accelerate and expand mobile services across the country, especially data services, with a focus on 3G and 4G mobile services.
"However, investment in upgrading and refurbishing fixed infrastructure to provide robust business broadband connectivity should be on the cards. Similarly, investment in broadband infrastructure, especially fibre-based, might also enable other digital services such as cloud, Internet of things and digital content services," adds Kalebaila.
Pater says even if telcos gain access to the Ethiopian market, it is unlikely to be a quick money-maker, but rather a longer term investment.
"The first issue is that with a government-controlled monopoly, prices are likely higher than they should be, in order to make money for the government and the economy; and no competition means growth usually remains limited.
"Secondly, even though it's a big market population-wise, it is not an affluent market. Ethiopia's GDP per capita is low, the middle-class is small and the majority of people's disposable income is low. The economy is growing strongly but off a low base. Also the population is very young so they are not spending a lot of money now, but may grow into a viable market in the next few years," Pater says.
Despite being Africa's fastest growing economy, Ethiopia's GDP per capita is less than $800 per year and around 40% of its population is under the age of 15.
"Is it another Nigeria? No, not really. Nigeria has a much higher GDP per capita, a bigger middle-class and twice the population of Ethiopia. Based on sheer numbers, you can grow economies of scale far quicker somewhere like Nigeria. So potentially, Ethiopia is a good market but there is more like a three- to five-year timeline for real money to be made," Pater says.
Kalebaila says the Horn of Africa nation will also likely attract a lot of players interested in expanding telco services in Africa, besides MTN and Vodacom.
"The likes of Orange, Airtel, China Telecom, even Unitel of Angola and Movitel might be eyeing this with interest. But we may also see a consortium of some sort that could include local Ethiopian investors partnering with foreign investors to promote local participation," says Kalebaila.
"This will definitely be exciting to watch and will only be good for Ethiopian consumers and enterprises who may benefit from additional investment and improvement of telecom services," Kalebaila concludes.