Republic of Djibouti
Ministry of Economy and Finance in charge of Industry
Ministry of Communication, in charge of posts and telecommunications
Ministry delegate in charge of the Digital Economy and Innovation

Questions and answers

  1. 1
    What is the meaning of Djibouti Telecom's capital opening for the Djiboutian State?

    The opening of Djibouti Telecom's capital fully register in the overall objective of accelerated development of the country, supported by the national strategy "Vision 2035".

    This reform of the historic operator is made possible by the draft law governing the partial or complete transfer of State holdings in the capital of public companies, adopted by the Council of Ministers on July 11.

    The opening up of Djibouti Telecom's capital to a strategic minority partner is a strong sign of the government's determination to pursue a proactive policy of modernizing the economy, increasing global competitiveness, and ensuring better governance of public companies.

    The aim is to prepare and be ready for regional and international competition, to optimize the operator's performance and assets, and to implement a hub development strategy, while maximizing local market opportunities (voice and data capacity, data centers, mobile money, etc.).

    Finally, this opening is in line with Djibouti's desire to support and rapidly develop a coherent and efficient ecosystem linked to the digital economy and new technologies, in which Djibouti Telecom will be one of the major players.

    By meeting these requirements and opportunities, Djibouti Telecom will be able to strengthen its position as a regional leader in order to meet the challenges of the future. For the benefit of its customers, the State, and the strategic partner.

  2. 2
    What does represent the sale of a significant minority of the capital ?

    The government of Djibouti wishes to sell 40% of the capital of Djibouti Telecom to a strategic private partner. The strategic private partner will thus benefit from a "significant" participation, allowing it to implement the policies necessary to achieve the objectives set for Djibouti Telecom. While ensuring real prospects of returns on investment.

    The objective of this mechanism is to ensure a strong and active partnership between the State and the private partner.

    At a later stage, the government may consider opening an additional part of the capital to the Djiboutian private sector.

    But in any case, the State of Djibouti will remain the majority shareholder after the operation, via the Sovereign Djibouti Fund (FSD).

  3. 3
    Can we talk about a "slow" privatization in the future?

    At this stage, the Djibouti government has no plans to sell off the majority of the historic operator, which is in a monopoly situation. Nevertheless, the State of Djibouti does not consider the monopoly as an intangible dogma. 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.

  4. 4
    How were chosen the international advisors involved in this operation?

    The international consultants involved in this operation have a long and diversified history of working with Djibouti and have recognized experience in the telecom sector. The Government has decided to retain them for this operation, which is of strategic priority.

  5. 5
    Does the Djiboutian government have a specific financial objective for this operation?

    The Djiboutian state is keen to value this significant stake at its fair price. But the objective is not only "financial". The operation should free up the room for maneuver necessary for the country's overall development as well as the strengthening of the telecom and digital economy sector.

  6. 6
    What is the exact schedule of this capital operation?

    The government hopes to finalize this transaction in the first half of 2022.

  7. 7
    What is the interest for a telecom company of international stature to become a minority shareholder in a company controlled by the State?

    This transaction is not unique. There are similar arrangements in Africa and in other parts of the world.

    The future partner will have a driving role in the management and development of the company.

    And for the partner, it is an operation with very high added value:

    • Djibouti's political and macroeconomic fundamentals are solid.
    • Djibouti benefits from a particularly attractive financial legal framework: free convertibility, free movement of capital, solidity of the Djibouti franc, indexation to the US dollar, independence of the central bank, etc.
    • The partner will be introduced into a highly strategic area of the African continent, in one of the most important trade routes in the world and in a regional market with very high potential (Horn of Africa, Ethiopia, East Africa...).
    • The political will has already allowed Djibouti to capitalize on its geographical position by positioning Djibouti Telecom at the heart of international data traffic through the major submarine cable routes.
    • Djibouti Telecom is financially strong and growing, with a double-digit net margin.
    • The development of this digital hub and a digital ecosystem is one of the priorities of the new five-year term of President Ismaïl Omar Guelleh (2021-2026). In this perspective, the Djibouti government is determined to promote a coherent ecosystem related to the digital economy and new technologies, of which Djibouti Telecom will be one of the major players. This represents an important growth opportunity for the company. The Ministry of Digital Economy and Innovation created in May 2021 will accompany this vision.
  8. 8
    What are Djibouti Telecom's most valuable assets?

    Djibouti Telecom has a solid performance, with revenues of more than 25 billion Djibouti Francs in 2020 (up 15% compared to 2018) and high margin levels.

    Beyond this financial approach, the company has several strategic assets:

    • A state-of-the-art digital network (4G + network, very important landing infrastructures of twelve high capacity submarine cables (AAE-1, SMW5, Dare 1...). serving the region, from Ethiopia to East Africa.
    • Access to significant bandwidth capacities that allow to play a structuring role in the region's communications.
    • Major development opportunities in mobile money and data centers.
    • Significant local market growth potential with relatively low mobile and Internet penetration rates.
  9. 9
    What is the real potential of the local market?

    The local market represents a population of about 1 million people.

    This market remains very attractive with a strong growth potential and a territory with human dimensions. Djibouti has one of the highest GDP per capita in the region (nearly $6,000 in purchasing power parity), with a rapidly growing middle class. The mobile penetration rate (44%) and access to very high speed Internet remain largely under developed. In addition, certain high value-added services such as mobile money were only launched in 2020. And their prospects are particularly attractive.

    This "internal capacity" is also connected to Djibouti's geographical and strategic location, which allows for an ambitious regional and international policy with additional revenues: voice and data, bandwidth capacity, interconnections, roaming, etc.

    Djibouti's economy is based on solid fundamentals, with strong growth potential. Trade through Djibouti's various ports is expected to develop rapidly, supported by a dynamic free trade zone, the Djibouti Free Trade Zone (DIFTZ). With an area of 4,800 hectares and a total investment of US$3.5 billion, this free trade zone will be the largest in Africa.

    Finally, Djibouti has an exceptional natural heritage, which is a factor in the development of tourism, as well as renewable energy capacities, given its geothermal, solar and wind power potential.

  10. 10
    What are the expected positive impacts for Djibouti Telecom and its customers?

    The opening of capital aims at the arrival of an international operator in the capital of Djibouti Telecom and its participation in the active management of the company.

    The strategic partner should bring this added value that will allow optimization and development.

    This pro-active approach must be translated in facts by :

     

    • An improvement in services (in particular through the deployment of 4G throughout the territory, Internet speeds, broadband...)
    • An acceleration of optical fiber deployment
    • Tariffs adapted to individuals and businesses
    • Accelerated development of new activities (data centers, mobile banking, call centers, etc.).
    • The development of the digital ecosystem with a significant potential for job creation.
  11. 11
    Should we fear restructuring and a social impact in the context of this capital opening?

    Any operation of modernization and transformation implies evolutions in the organization and the structure. Maintaining and developing employment, whether at Djibouti Telecom or within other companies, remains a priority for the government, which considers that this operation must promote the development of Djibouti Telecom and therefore create wealth for all Djiboutians.

    In any case, the necessary adaptations will have to be the subject of an ongoing dialogue between the company's employees, the strategic partner and the State, which via the Djibouti Sovereign Fund will retain a majority stake in Djibouti Telecom.

    This opening of capital must also be the engine of a better training of managers, technicians, employees, a real investment in the human wealth of the company.

  12. 12
    How can Djibouti Telecom envisage a long-term future in a market that has been disrupted by the rise of GAFA and OTT (over the top services)?

    Like all telecom operators in the world, Djibouti Telecom is facing the rise of OTTs (services such as WhatsApp, Signal, etc.). These new means of telecommunication have an impact on the voice segment, but also represent a real opportunity on the data segment.

    Djibouti Telecom has a structure and significant investments in submarine cable networks and fiber optics in order to be a leading player in very high speed and international connectivity.

    Djibouti Telecom's strategic positioning also makes it a key player in connectivity in the sub-region and in Africa. In this context, the approach with GAFA is rather collaborative and discussions are underway to allow Djibouti to consolidate its status as a regional hub.

  13. 13
    The official announcement of July 11, 2021 mentions precise specifications for the future strategic partner. What are the essential elements of these specifications?

    The terms of reference will be sent to partners who express an interest. The major component of these specifications remains the continuous improvement of access to communications services for consumers and the protection of the strategic interests of Djibouti.

  14. 14
    Will the regulatory authorities be ready by the time the transfer is implemented?

    The regulatory authority has already been created and Mister Abdi Ilmi Achkir has been appointed as director general.

    The State’s objective is to have an authority that is gradually gaining competences and autonomy.

  15. 15
    How will the State of Djibouti protect its sovereign interests?

    The State's position as majority shareholder, via the Sovereign Wealth Fund, is a guarantee that its sovereign interests will be safeguarded. The creation and operationalization of the regulatory authority, following the example of the way the sector operates in most countries, will also ensure that the interests of the various parties are aligned.

    In addition, the draft law on the terms and conditions for the transfer of State holdings in the capital of public companies strengthens the rights of the State, which it could put into effects if needed to protect national interests.

  16. 16
    What will be the future rules of governance between the public shareholder and the private partner of Djibouti Telecom?

    The rules of governance will be negotiated between the State and the operator. The State, through the Sovereign Wealth Fund, will continue to play its role as majority shareholder. The relationship and collaboration between the parties will be the subject of an equitable shareholder pact.

  17. 17
    Are other public companies concerned by this opening of capital to the private sector?

    The draft law on the partial or complete transfer of State holdings in the capital of public companies will create an operational legal framework. The opening of Djibouti Telecom's capital corresponds to a strategic option, to a priority, that of developing a digital economy, a source of job creation and a catalyst for other upstream and downstream investments. To date, no other project to open up the capital is under consideration.

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