Viewpoints | Apr 20,2020
June 20 , 2020
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Ernst & Young (EY), an advisory, tax and transaction services provider, has moved closer to securing a deal to advise the partial privatisation process of the state-owned Ethio telecom. EY has been in a neck and neck race with Deloitte, another accounting and financial advisory firm, for the contract.
EY offered the lowest price of 3.72 million dollars to advise on the partial privatisation process of the over-a-century-old telecom giant. The second-lowest bidder, Deloitte made an offer that was 58,000 dollars higher than EY's offer. The technical evaluation put Deloitte in the top spot with a score of 77.3pc, which was higher by a percentage point than its close competitor EY.
The aggregate weighting result placed EY on top, scraping ahead of Deloitte with a 0.1pc point difference. The winning company is expected to be announced in a week.
A total of four global consulting firms vied for the project, including EY, Deloitte, PricewaterhouseCoopers (PwC) and Ronald Berger. During the financial opening that was held on June 16, 2020, PWC, which came in third place on the technical evaluation, offered 11.17 million dollars, while Ronald Berger placed a bid of 4.65 million euros.
The Ministry of Finance, which has been handling the pre-privatisation process of the state-owned enterprise including Ethio telecom, floated an expression of interest for the project at the end of September, inviting international companies to supervise the privatisation process of the state-owned giant. The World Bank allocated the budget to hire the consultant under the Ethiopia Digital Foundations Project.
The bid had initially drawn the attention of KPMG, which was disqualified due to a conflict of interest that could arise following its ongoing contract with Ethio telecom in conducting the asset valuation. The state telecom giant hired KMPG last August to handle the asset valuation for one million dollars.
The winning consultant, which will be hired for an estimated 14 months, will undertake due diligence and recommend a feasible mode of privatisation of the company. The consultant will also be involved in the preparation of bid documents for the partial privatisation, review the initial asset valuation, identify bidder selection criteria, and undertake legal due diligence including taxes, contracts and liabilities.
The government has decided to divest 45pc of the company for privatisation, keeping 55pc under state ownership. Five percent will be availed for public subscription.
As one of the highest-earning state-owned enterprises, Ethio telecom generated over 22 billion Br in revenues, of which 73 million dollars was in foreign currency, in the first half of this fiscal year. It paid 3.9 billion Br and two billion Birr to the government in the form of taxes and dividends, respectively, in the reporting period.
The company was also able to push the number of telecom service users to 45.6 million, a 10.9pc increase from the same period the previous year. It raised the telecom penetration rate to 45.4pc. Out of its total customer base, 44 million use mobile devices, 22.7 million use data and one million are fixed-line users.
Once the Ministry of Finance hires the transaction advisor, it will hand over the privatisation process to the Public Enterprises Holding & Administration Agency and will commence implementation of the transaction alongside the consultant, according to the recently legislated Public Enterprises Privatisation Proclamation. The proclamation split the process into pre-privatisation, privatisation and post-privatisation.
In the pre-privatisation process, the Finance Ministry determined the modality of the company's privatisation, the number of shares to be availed for sale, and ensure that the company is prepared for privatisation.
The proclamation, which was legislated two weeks ago, also gave the Ministry and the Agency the right to decide if a portion of a public enterprise will be reserved for the employees of the enterprise in question. The government shall also retain a golden share, which gives it veto power over board resolutions of the public enterprises on which it does not retain a majority stake.
PUBLISHED ON Jun 20,2020 [ VOL 21 , NO 1051]
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