The puzzle of Ethiopia and the Budget Telecom Network model


Posted on June 15, 2011  /  0 Comments

According to the Nokia Total Cost of Ownership (TCO) study 2011, Ethiopia’s mobile prices bring it to the very threshold of membership in the “Under USD 5 club” of 11 countries. The TCO in Ethiopia in 2010 was USD 5.02.

This is a puzzle and appeared to pose a challenge to the entire explanation of the conditions for the emergence of the BTN business model. Because Ethiopia is a member of another exalted “club,” the “bottom-ten” in terms of mobile connectivity. According to my analysis of ITU data, only North Korea, Myanmar, Kiribati, Eritrea and the Marshall Islands have less mobiles/100 people than Ethiopia. It is also one of last remaining unreconstructed integrated government-owned telecom monopolies in the world. The condition for the emergence of the BTN model is intense competition. How could low prices exist in a low-penetration, monopoly market?

To solve the puzzle, we went to the research on Ethiopia by our sister organization, Research ICT Africa. And we found that mobile network coverage is very low and limited to the principal cities; that it is very difficult to obtain a SIM (if waiting lists were maintained for mobiles, there would be a long waiting list in Ethiopia); that the financial condition of the sole provider was parlous; and that the low prices were an artifact of administrative pricing decisions.

So the puzzle was solved and the explanation for the emergence of the BTN model stands.

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