Safaricom to invest $600 million in Ethiopia

Kenyan operator Safaricom announced, late last week, plans to invest an initial $600 million in Ethiopia, as the telecom company looks to begin moving in its operations within the country following the liberalization of its telecoms sector.

Safaricom’s chief executive Peter Ndegwa has suggested an expense of between $1.5 billion and $2 billion will be needed over the next five years, to meet the license coverage obligations, with break-even in year four.

Nevertheless, he added that this target may be adversely affected by the impact of the current conflict on the launch of operations, which he has suggested will be in mid-2022.

The investment of the $600 million in Ethiopia represents the companies’ contribution to the start-up costs and operating license for which the consortium, that happened late last week, has agreed to pay $850 million in order to help with those requirements, while infrastructure and other costs will also be involved.

The ongoing government conflict against Tigrayan forces and their allies could destabilize progress, with Safaricom evacuating some staff as a precaution earlier last week.  In addition, the sale of a 40 percent stake in state-owned Ethio Telecom and the award of another mobile operator license are also supposedly on the way.

As such, Safaricom monitors around 64.5 percent of the Kenyan market in 2020, with a subscriber base estimated at 35.6 million, according to numbers by Statista.

“Safaricom was the largest mobile telecom operator in Kenya throughout the given period from 2018 to 2020, with a market share of 63.6 percent in the fourth quarter of 2020,” it added.

“Airtel Networks Limited accounted for about 27.2 percent in the same period, making it the country’s second biggest provider of mobile subscriptions,” Statista noted.

The expectations are that the second telecoms provider will start operations in the first quarter of next year at the same time as the government is finalizing legal changes to allow the central bank to issue Safaricom with a license for mobile financial services, a matter that was not included in the initial licensing deal.