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332 Diagnosing Corruption in Ethiopia
networks in large countries with predominantly rural populations. In
any case, there is a risk that the investment may not be recouped. Risk
factors include lower-than-expected demand, higher-than-expected
costs, technical difficulties, unplanned obsolescence, and unexpected
competition in the market. Unpredictable government behavior also
creates risks, ranging from punitive increases in the license charges or
conditions to worst-case scenarios such as nationalization.
• Difficulty in valuing telecoms concessions and operations. Numerous factors
affect the value of a network operator’s concession, including the
cost of installing and operating the network; the level of consumer
demand; the number of competitors; the prices charged for telecoms
services; and the license fees, taxes, and other costs paid to the government.
Each of these factors can fluctuate significantly from year to year,
making it difficult to determine objectively whether a contract with a
telecoms supplier has been placed at a fair market value.
• Extent of government control. Most countries control their telecoms concessions
through regulation and licensing. Typically, a license is required
for the initial concession, and permits are needed in connection with
various construction, safety, and environmental protection issues. This
gives considerable discretionary power to officials. Unless the law and
regulations are extremely clear and unless the officials have integrity
and are properly monitored and controlled, this power can be abused
and result in corruption. Such risks are particularly high in countries
where telecoms services are delivered by a state-owned monopoly that
is not accountable to a strong and effective regulator.
• Interface with the construction sector. The construction industry is known
to be a particularly high-risk sector from a corruption perspective. 3
Given that construction companies deliver much of the infrastructure
used by the telecoms industry—including buildings, the erection of
mobile phone masts, and the laying of cables—there are clear and significant
indirect risks affecting the telecoms sector.
• Lack of transparency. Few countries actively disclose the details of telecoms
network licensing or enable the public (including the media)
readily to determine the competitiveness of a telecoms license awarded
to a private sector operator. Similarly, few governments disclose the
revenue they receive from telecoms licenses and network operations or
account publicly for how they are used. Private operators must report
revenue to tax authorities and their shareholders, but they often have