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Djibouti gives industry six weeks to show interest in 40% of incumbent

2 August, 2021

Alan Burkitt-Gray

 

The north-east African state of Djibouti has set Thursday 16 September as the deadline for investors to express interest in taking a 40% stake in the incumbent operator.

But at the same time, in documents published at the end of last week, the government has warned that Djibouti Telecom might face competition in the near future.

“The state of Djibouti does not consider the monopoly as an intangible dogma,” said the government, which originally announced plans to sell the stake just last month.

“In the context of a development that has been experienced by the vast majority of African and emerging countries, the company must prepare to face competition from new entrants and the liberalization of the sector, particularly in the cell phone sector,” said the government in the first detailed account of how it will proceed with the sale.

Djibouti has not set a timetable for the sell-off after 16 September, which is just over six weeks away, but says “the selected potential buyers” will be contacted and invited to submit “indicative offers”. It hopes to complete the sale in the first half of 2022.

Djibouti Telecom is a monopoly operator in the state, and also shares ownership of seven subsea cables that land there, and has stakes in an eighth, through WIOCC.

These have total capacity of 1.6Tbps, according to a briefing document prepared by SouthBridge, a African-focused financial group based in Côte d’Ivoire, France and Rwanda. SouthBridge is calling the investment opportunity Project Aden, even though the city of Aden is in Yemen, across the Red Sea from Djibouti.

Djibouti is also a crucial connection point to Ethiopia, which is already selling off a 40% stake in Ethio Telecom, the monopoly until recently, and has licensed a competitor, the Safaricom-Vodacom-Vodafone consortium, to start operations.

The SouthBridge briefing says that Djibouti Telecom “has deployed terrestrial cables to Ethiopia and Somalia which are currently 39.5% utilised but can be upgraded to increase the capacity”.

In its home market, Djibouti Telecom has a 2G network covering 95% of the population, 3G covering 80% and 4G covering 75%.

In its own briefing, the government of Djibouti says it is looking for “a strategic minority partner” as “a strong sign” of its “determination to pursue a proactive policy of modernising the economy, increasing global competitiveness, and ensuring better governance of public companies”.

The government wants “to prepare and be ready for regional and international competition” and “to optimise the operator’s performance and assets, and to implement a hub development strategy, while maximizing local market opportunities”.

It says the selected investor will “benefit from a ‘significant’ participation, allowing it to implement the policies necessary to achieve the objectives set for Djibouti Telecom”.

It is clear that the government is looking for a telecoms operator to take the 40% stake, not a private equity investor. It wants “telecom company of international stature”.

The government notes that it “may consider opening an additional part of the capital to the Djiboutian private sector” at a later stage. “But in any case, the State of Djibouti will remain the majority shareholder after the operation, via the Sovereign Djibouti Fund (FSD).

Capacity Media

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