Safaricom consortium gets licence to enter Ethiopia

Safaricom CEO, Peter Ndegwa holds the 2020 Global Mobile (GLOMO) Award, awarded to Safaricom by Global Systems for Mobile Communications Associations (GSMA) in recognition of Safaricom's outstanding contribution to the mobile industry. [David Njaaga, Standard]

Safaricom can now tap into the lucrative Ethiopian market after the country awarded an operating licence to a consortium that is led by the Kenyan telco.

This paves the way for the company’s expansion into Ethiopia, which has massive opportunities for growth owing to its over 112 million population.

This comes following a decision by the Ethiopian government to award the bid for a second nationwide telecommunication licence to a consortium that includes Safaricom and parent companies Vodacom Group of South Africa and Vodafone Group of UK. 

“The Ministry of Finance and the Ethiopian Communications Authority warmly welcome the award of one new telecommunication licence to the Global Partnership for Ethiopia, a private consortium of Safaricom (Kenya), Vodafone Group (UK), Vodacom Group (South Africa), DCD Group (UK) and Sumitomo Corporation (Japan) and Development Finance Cooperation (DFC) today,” said the country’s minister of finance in a statement yesterday.

According to senior government officials who spoke to news agencies, the consortium placed a USD850 million (Sh85 billion) bid to bag the licence.

MTN International, backed by China, offered USD600 million.

The Safaricom consortium pledged to invest another Sh800 billion over the next 10 years to roll out telecommunication services.

“Global Partnership for Ethiopia is a consortium of reputable telecom companies providing service to over 750 million customers all over the world and committed to create new jobs, support the economy through introduction of new and efficient services,” said Ethiopia Communications Authority (ECA) Director General Balcha Reba.

“I am also very pleased the consortium will invest $8 billion over the next ten years.”

A customer holds a 3G prepaid sim card after buying the service from an Ethio-Telecom shop in Addis Ababa, Ethiopia. [Reuters]

Partial privatisation

The decision by ECA comes less than a month after the state regulator received two bids for two licences to roll out nationwide operations under the new market structure.

Securing the bid further puts Safaricom ahead of regional competitors MTN that bid for the licence alongside state-run Ethio Telecom.

“With over $8 billion total investment, this will be the single largest foreign direct investment into Ethiopia to date,” said Ethiopia’s Prime Minister Abiy Ahmed. “Our desire to take Ethiopia fully digital is on track.”    

Global service providers have been waiting in anticipation for the liberalisation of Ethiopia’s telecommunications market that began more than three years ago when the Council of Ministers agreed to partial privatisation of Ethio Telecom and the issuance of two other operating licences. 

Ethio Telecom had 50.7 million subscribers as at January 2021, including 23.5 million data and internet users as well as 309,000 and 981,000 fixed broadband and fixed service subscribers respectively. 

While inviting bids at the end of last year, ECA said service providers needed to comply with strict technical and financial qualifications to demonstrate the company had the capacity to manage a licence of its scale.

“Under these licences, service providers will have the right to provide any telecommunication service, including voice, text and data using any technology whether fixed or wireless anywhere within Ethiopia and to send and receive telecommunications to and from outside Ethiopia,” said the authority in its call for bids.

Access resources

The winning consortium will be allowed an initial licence term of at least 15 years with the possibility of renewal.    

“In addition, the licences will provide each of the licensees the right to obtain access to scarce resources such as radio frequency spectrum, numbering and addressing resources and rights of way with considerations to the time frame to be allotted to the incumbent operator to complete frequency re-farming activities,” said ECA.

Safaricom first announced it was eying entry into the Ethiopian market in 2017 but efforts to enter the market on its own over the past four years made little headway.

The consortium allows the firm to leverage on the resources of its parent company to roll out its suite of products that have proven hugely successful in the Kenyan market.

According to Safaricom’s latest financial results for the year ended December 31, 2020, the company recorded Sh289 billion in revenue from M-Pesa Global, a 54 per cent increase compared to Sh164.7 billion recorded in 2019. 

M-Pesa Global was created following a reorganisation that saw Safaricom and Vodacom acquire full control of the mobile money brand.