Africa: Safaricom sees Ethiopia deal opening gateway to Africa

Kenya’s largest mobile phone operator Safaricom is pinning its pan-African expansion plans on the Ethiopian market even as Prime Minister Abiy Ahmed’s administration wavers on opening up the economy to foreign investments.

The telco, which is listed on the Nairobi Securities Exchange (NSE), is betting on the Ethiopian government’s planned privatisation of the state monopoly Ethio Telecom and the sale of two new telecom licences to gain a foothold in Africa’s fastest-growing economy and the continent’s second-most populous nation with more than 100 million people.

However, outgoing Safaricom chief executive Michael Joseph told The EastAfrican that these two processes — privatisation of Ethio Telecom and the auction of telecom licences — have been cancelled until the presidential poll, which had been scheduled for August 29.

“They have postponed both processes until after the elections,” said Mr Joseph.

However, he said the telco’s plan to invest in the Horn of Africa is still on particularly after the firm completed the acquisition of the mobile money platform M-Pesa from Britain’s Vodafone through a joint venture with South Africa’s Vodacom in April.

“Safaricom and Vodacom have acquired the M-Pesa brand, including, product development and support services. The acquisition will now enhance further expansion into the Africa market. Our investment into Ethiopia is still in the pipeline pending the decision by the government,” said Mr Joseph.
Ethiopia had planned to award two telecoms licences to multinational mobile companies by April 2020. Its electoral body, NEBE, postponed the August presidential and parliamentary elections amid the deadly Covid-19 pandemic that has paralysed activities globally due to lockdowns.

In early April, the government indicated that only local companies will be allowed to offer mobile money transfer services in the country as it seeks to boost non-cash payments.

The Ethiopian Communications Authority recently tabled the draft directives for the licensing of telecommunication companies inviting submissions from stakeholders from April 28 to May 11.

Safaricom, the most profitable firm in the region, saw its net earnings for the year ended March 31 increase by 19.5 per cent to Ksh74.7 billion ($747 million) from Ksh62.49 billion ($624.9 million) buoyed by its mobile money transfer platform and increased usage of mobile data. Its stock on the NSE jumped 4.69 per cent to Ksh29 ($0.29) per share on April 29.

According to the telco’s audited financial statements, service revenues grew 4.91 per cent to Ksh263 billion ($2.63 billion) from Ksh250 billion ($2.5 billion), with M-Pesa contributing 33 per cent of the total service revenue. M-Pesa revenues grew 12.6 per cent to Ksh84.4 billion ($844 million) while mobile data revenue grew 12.1 per cent to Ksh40.67 billion ($406.7 million) supported by the rollout of non-expiry data bundles. Voice service revenue, which makes up the bulk of the telco’s revenues, declined 1.4 per cent to Ksh94.45 billion ($944.5 million), while messaging income declined by 12.3 per cent to Ksh17.9 billion ($179 million).