Safaricom shares hit record high on Ethiopian expansion
By Frankline Sunday | May 26th 2021
Safaricom has recorded the highest share price since listing at the Nairobi Securities Exchange (NSE), on news that the company was venturing into the Ethiopian market.
Data from the NSE indicates investors traded Sh833 million worth of Safaricom shares yesterday alone, with its stock hitting an all-time high of Sh43.10, before closing the day at Sh42.75. A consortium that includes Safaricom and parent companies Vodacom Group of South Africa and Vodafone Group of UK paid $850 million for a telecoms license to operate in Ethiopia. Other partners in the deal include CDC Group (UK), Sumitomo Corporation (Japan) and Development Finance Cooperation (DFC).
In a statement yesterday, Safaricom announced the formation of Vodafamily Ethiopia Holding Company Limited, incorporated in England and 90 per cent owned by Safaricom, 10 per cent by Vodacom International Limited and 1 share held by Vodafone International Limited.
Vodafamily Ethiopia will further own a 61.9 per cent stake of a new holding company registered in the Netherlands called Global Partnership for Ethiopia B.V. (GPE). Other shareholders of GPE are Sumitomo Corporation and CDC Group PLC.
Safaricom CEO Peter Ndegwa said the Netherlands was chosen to house the consortium owing to a bilateral investment agreement between the Netherlands and Ethiopia. “Given that we have an international consortium of investors the holding company is held in the Netherlands,” he explained. “One of the reasons is because the Netherlands has a bilateral investment treaty with Ethiopia.”
“We’ve also said some of the SVP held out in the UK will be moved out to Kenya in a company known as Safaricom Family Ethiopia Holding Company so it will be domiciled in Kenya but the holding company will be based out of the Netherlands.”
A bilateral investment treaty between Ethiopia and the Netherlands signed in 2003 allows companies to transfer payments relating to their investment in a freely convertible currency.
This makes it easier for firms to transfer profits, interests, dividends and capital funds for acquiring raw materials and assets between their investments in Ethiopia.
The agreement also provides for compensation or other types of settlements in cases where investors suffer losses from causes of war, armed conflict, revolt or state of emergency.
Ndegwa said the expansion into Ethiopia with its 112 million residents would be a big driver of growth for the company in the medium- to long-term. “We have a clear plan to meet our license requirements from the Ethiopian Communication Authority (ECA) in terms of population coverage,” he explained. “We are not going to disclose how much we are going to be investing at this stage, but the consortium will be adequately funded to expand across the GSM business.”
Ndegwa said the license granted at this stage was only for communication services and did not include mobile money. This follows a moratorium by the Ethiopian government barring foreign companies from operating mobile money services.
In recent months, the Ethiopian government has shown signs of loosening this restriction, paving way for the launch of M-Pesa in the country as early as next year. "The Ethiopian authorities recently confirmed that a new licensee would be allowed to operate mobile money within 12 months,” said Ndegwa. “This needs to be confirmed in writing, but it is good progress.”
Safaricom’s term of the Ethiopia Telco License will be for an initial term of 15 years, with the right to apply to the ECA for an additional 15 years.
The company has scheduled it's annual general meeting for 30th July 2021 where shareholders will be asked to ratify the creation of the new subsidiaries.
Local cement firms eye own clinker production to cut costs
- Extension of Sh3.5b meter-gauge railway line complete
- How healthy living has turned ginger into a goldmine for farmers
MONEY & MARKET
- State boosts local vehicle assembler with military deal
- Cost saving tactics to survive harsh economic times
By Peter Theuri
- Flower farm workers to benefit from Sh60 million clean energy initiative