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Conflict and restrictions stymie operations in Amhara, Oromia regions

Executives of Safaricom Telecommunications Ethiopia Plc say they have no plans to raise equity from the soon-to-be Ethiopian stock exchange in the near future. The company will rely instead on shareholder equity and credit to raise the capital the operator needs to widen its network coverage in Ethiopia.

Peter Ndegwa, CEO of Kenya-based Safaricom Plc, responding to The Reporter’s quest during a virtual press briefing on Thursday, stated the Kenyan firm wants to test the waters before listing on Ethiopia’s maiden securities exchange.

“At this stage, we are not relying on any listing of equity to finance the Ethiopia business. But over time, we will see how to involve local investors and local participants in Ethiopia, either through corporate bonds or equity as Ethiopia’s stock market matures,” said the CEO.

Twenty-five percent of Safaricom stock is listed on the Nairobi Securities Exchange (NSE).

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Meanwhile, the Ethiopian government has announced its decision to list 10 percent stake in Ethio Telecom on the upcoming Ethiopian Securities Exchange (ESX).

“We know the Ethiopian government is creating a framework that enables companies to issue equity and also bonds. We will see at what stage we will take advantage of the upcoming stock market in Ethiopia. But at this point, we are primarily reliant on the capital that is coming from the key shareholders and also some loans,” he added.

Although the CEO stated plans to set up a “truly Ethiopian business,” experts who spoke to The Reporter contend that Safaricom Ethiopia does not yet have ‘management sovereignty’ and operates fully under directions set out by executives in the Nairobi head office.

Safaricom management published a report on the performance of its Ethiopia operations on May 9, 2024. It reveals that shareholders have thus far injected USD 1.6 billion in equity cash funding, aside from USD 100 million in credit from the IFC and a further USD 134 million in domestic currency funding.

The company had initially planned to shell out up to USD 2 billion over the first five years in capital expenditure (capex), but has since reviewed the figure and capped it at USD 1.3 billion. A little more than USD 850 million has been invested already, according to the report.

It reveals Safaricom managed revenues of close to 2.53 billion birr (5.76 billion Kenyan shillings) in its first full year of operation since launch. Mobile data revenues from Safaricom Ethiopia’s 4.4 million users account for nearly three-quarter of the total, according to the report, which covers the Kenyan fiscal year that ended on March 31, 2024.

Safaricom’s average revenue per user (ARPU) is a full 71 percent lower in Ethiopia compared to earnings in Kenya, Tanzania, DRC, and Mozambique. However, the report indicates that data usage in Ethiopia is 67 percent higher than in other markets.

Safaricom expects to break even on its investments in Ethiopia by the end of the 2026 fiscal year.

Its recently-introduced M-PESA mobile money network has garnered more than four and a half million customers and close to 26,000 agents in the new Ethiopian market, according to the report.

The operator has registered 4.4 million customers, with 2.8 million data users. Its mobile money service has managed 4.5 million registered customers and recorded over 31 million financial transactions so far.

Ethio telecom’s Telebirr boasts 44 million subscribers and 775 million transactions over the last three years.

Safaricom operates a little more than 2,800 telecom towers in Ethiopia, nearly half of which are leased from and shared with the state-owned Ethio telecom, and covers 38 percent of the population at present.

Recently appointed CEO Wim Vanhelleputte had previously disclosed to The Reporter plans to add 1,000 towers to the network. He estimates the company will need at least 7,000 towers to cover the entire Ethiopian population within the coming three years.

The report indicates Safaricom’s plans to achieve 55 percent coverage by June 2025, in accordance with the terms of its telecom operators license.

However, conflicts and restrictions in parts of Ethiopia are casting a shadow on the company’s ambitions, according to the CEO.

“Our operations in conflict areas [in Ethiopia] remain subject to restrictions,” said Vanhelleputte during a briefing earlier this week. “For instance, we have 500 towers in the Amhara region, where there are data restrictions due to the state of emergency.”

The figure accounts for nearly a fifth of the telecom towers the firm operates in Ethiopia.

“It is a known fact that the state of emergency declared since August in the Amhara region is affecting us. In terms of our commercial operations, of course these are setbacks. We have to work within the limitations, under the restrictions of the state of emergency. It does affect our operations, that is for sure. We hope the state of emergency will be lifted in the next few weeks or months. Then we will be able to resume full commercial activity just like the rest of the country,” said Vanhelleputte, who was brought in to replace founding CEO Anwar Soussa last year.

The report released this week indicates that transportation restrictions in the Oromia region have also posed some challenges. It notes a “stable security situation” in Tigray.

Vanhelleputte indicated that security concerns, limited access to smartphones, and regulatory shortcomings continue to pose obstacles to Safaricom’s ambitions as Ethiopia’s first private telecoms operator.

Forex liquidity issues and high inflation in Ethiopia are also mentioned as obstacles in the Safaricom annual report.

Nonetheless, the operator has ambitions to see up to 10 million registered mobile customers and 4 million M-PESA users by the end of 2025.

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