TOKYO -- Sumitomo Corp. will offer mobile services in Ethiopia as part of a consortium with British telecom provider Vodafone Group, becoming the first Japanese company to enter the market in Africa.
Ethiopia approved a license for the consortium to provide mobile services in the country. The grouping, which also includes British development finance specialist CDC Group, will establish a joint venture. Sumitomo is expected to hold a stake of slightly less than 30%.
Outlays are projected to top $8 billion over 10 years, including capital investment for base stations. Services are expected to start in 2022. The Japanese government is supporting the initiative, with the U.S. International Development Finance Corp. likely to provide financing as well.
Africa's telecommunications infrastructure contains a high percentage of Chinese equipment -- from the likes of Huawei Technologies and ZTE -- which has been cited for potential security risks. Japan, the U.S. and the U.K., concerned that the trend would continue, approached Ethiopia about the consortium's participation.
State-run Ethio Telecom has dominated the sector in Ethiopia. The partial privatization of the company began in 2019, with the government deciding to open the wireless sector to competition. Bids were solicited the following year, and the window closed last month.
Plans called for granting licenses to as many as two entrants, and other companies made bids. But only the U.K.-Japan consortium was selected.
"This will be the single largest FDI [foreign direct investment] into Ethiopia to date," Ethiopian Prime Minister Abiy Ahmed said in a tweet.
Ethiopia is among Africa's largest countries, with 112 million people. As penetration of mobile phones in the nation has reached only about 40%, the consortium sees opportunity for growth.
The selection also represents the first project under Sumitomo and Vodafone's strategic partnership reached in November. In addition to cellular service, the group plans to roll out offerings in areas such as digital money, education and medical IT.
China has sought to establish a digital Silk Road, based on its own internet network, as part of Beijing's broader Belt and Road infrastructure initiative. Among overseas projects undertaken by Chinese companies from 2006 through June 2020, nearly 40% have been in sub-Saharan Africa, according to Mizuho Research & Technologies.
"Huawei is handling 70% of Africa's 4G network," said Yoshino Tamai at Mizuho Research.
The selection of the Vodafone-Sumitomo consortium increases the likelihood that equipment from Japanese companies such as NEC and Fujitsu will be used.
"We will also be able to provide insight from the privatization of [Nippon Telegraph & Telephone]," a Japanese government official said, referring to the country's telecom giant, which previously was fully state-owned.