Ethiopia has contracted China’s Huawei and ZTE to undertake a $1.6-billion expansion and upgrade of State-owned telecoms company Ethio Tele-com’s mobile-phone network.

The project will see the introduction of a 4G mobile-phone network in the capital, Addis Ababa, as well as expansion of the 3G network nationwide by the end of 2015.

“The expansion is vital to attain Ethio Telecom’s objective of increasing telecom service access and coverage across the nation, as well as to upgrade existing networks to new technology,” says acting Ethio Telecom CEO Andualem Admassie.

Analysts have said the deal entrenches the State-controlled economic model, in which government-owned enterprises monopolise key sectors, such as telecommunications, power, finan- cial services and commercial aviation. In fact, Ethiopia does not allow foreign companies in the financial services sector, while only partial foreign investment is allowed in the manufacturing and agriculture sectors.

Lack of a vibrant telecoms sector in Africa’s fastest-growing economy has hindered the services penetration rate, with only 25% of the country’s 80-million people having access to mobile telephony and fewer than 3% with access to the Internet.

This contrasts with other African countries, which have allowed competition in the sector. In neighbouring Kenya, for instance, mobile-telephony penetration stands at about 80%, while over 40% of the population has access to the Internet.

The deal with Huawei and ZTE is a complex one, and details on the projects each company will undertake have yet to be finalised.

“I hope we can settle some of the complicated issues and enter the implementation stage as quick as possible,” says ZTE CEO Jia Chen.

In the expansion plan, Ethiopia is divided into 11 zones, with ZTE expected to work in five zones, while Huawei will work six and also construct the new 4G network in Addis Ababa. The 4G technology allows for browsing speeds of 100 mb a second.

The project is expected to increase the mobile service penetration rate from the current 23-million to 50-million users.

The deal comes barely ten months after Ethio Telecom ended a management contract with France Telecom.