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Safaricom bets on Ethiopia amid regulatory headwinds in Kenya

President William Ruto and Ethiopia Prime Minister Abiy Ahmed during the official launch of Safaricom Ethiopia Network on October 6, 2022. [PSCU, Standard]

Safaricom is betting on its foray into Ethiopia to grow revenues on the back of regulatory headwinds in Kenya.

The firm’s Ethiopian subsidiary switched on its mobile network yesterday, rolling out its 2G, 3G and 4G network across 11 cities.

“We are pleased to switch on our network and start services in Addis Ababa, and to hold our national launch ceremony,” said Safaricom Ethiopia Chief Executive Anwar Soussa.

The network is currently available in Dire Dawa, Harar, Haramaya, Adama, Bahir Dar, Bishoftu, Mojo, Debre Birhan, Awoday, Gondar and Addis Ababa with the national network rollout expected to reach 14 additional cities by April 2023.

“Building on the phased city-by-city customer pilots, we continue to invest in providing network and services to further cities and parts of the country in accordance with the obligations of our Unified Telecommunications Services Licence.”

Safaricom Ethiopia is offering 4G data, voice, SMS, international calls and the sale of devices with services offered in five languages; Amharic, Afaan Oromo, Af-Somali, Tigrigna and English.

Safaricom CEO Peter Ndegwa, a director at Global Partnership for Ethiopia, said the company is looking forward to the Ethiopian government’s continued support particularly in completing reforms in the telecommunications sector.

“We look forward to the government’s continued support and partnership in fast-tracking tier 1 prioritisation for investment incentives, acceleration of the telecommunications reform programme and the conclusion of the issuance of the Mobile Financial Services Licence,” he said.

In 2021, the Ethiopian Communication Agency awarded the bid for a second nation-wide telecommunication licence to a consortium that includes Safaricom and parent companies Vodacom Group of South Africa and Vodafone Group of UK.

The consortium established Safaricom Telecommunications Ethiopia, which has so far invested more than Sh117 billion, including the telecoms licence fees, importation of equipment worth Sh35.1 billion, a call centre and two data centres to roll out operations.

Safaricom Ethiopia’s only competitor, state-owned Ethio Telecom, has aggressively pushed its drive to recruit new subscribers in anticipation of the new rival’s market entry.

Between January 2021 and February this year, Ethio Telecom subscribers grew from 50.7 million to 60 million as and the firm is targeting to hit 73 million by 2023.

Analysts believe that Ethiopia’s 115 million-large population, vast geographical area and low financial services adoption provides mobile network operators with a huge opportunity to earn new revenues.

Safaricom’s foray into Ethiopia comes on the back of increasing regulatory pressure from the government and regulators that could disrupt the Kenyan operations in the near term.

Last week, the telco halved the costs on its popular overdraft facility Fuliza, in part due to pressure from the new William Ruto administration.

The new lending terms that include a freeze on maintenance fees in the first three days for loans less than Sh1000, will affect up to 80 per cent of loans and consequently a big chunk of the telco’s commissions from Fuliza.

According to the company’s latest annual report, Sh502.6 billion was disbursed through the facility in the year ended March 2022, an increase of 43 per cent compared to a similar period last year.

The government and regulators such as Communications Authority of Kenya, Central Bank of Kenya and Office of the Data Protection Commissioner are also in the process of implementing tighter regulations that touch on the core business aspects of the giant telco.

Safaricom recorded Sh67 billion in profit after tax for the 2022 financial year, a marginal drop from Sh68.6 billion earned in 2021.

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