Expanding our footprint into Ethiopia
In 2021 the Global Partnership consortium for Ethiopia, led by Safaricom, was awarded a licence by Ethiopia’s Ministry of Finance and the Ethiopian Communications Authority (ECA) to establish a new telecoms network and to operate in that country.
Ethiopia is Africa’s oldest country, home to over 112 million people – a nation rich in history, and with an average 7% GDP growth over the last seven years. It has immense potential in telecommunications and mobile financial services.
This environment provides an exceptional opportunity for us to assist in its transformation journey, as we work to change the digital lives of our customers there. The economic and social impact which we will be helping to bring about through our high-quality network and mobile services through faster internet, high-speed fibre connectivity and game-changing mobile money services, will be driven by our purpose of transforming lives. Our goal is to provide Ethiopians with endless opportunities, as we bring our expertise, experience and technology to the country.
Since the award of the licence, we have been building a top-quality mobile network that will enable Ethiopians to access a world-class array of digital services. We are now ready to launch our network, underpinned by the same vision, mission and purpose of transforming lives as in Kenya.
Our Ethiopia investment remains a key focus area for the business. Cognisant of the size of the technological and financial investment required, we are committed to building a high-quality mobile network in Ethiopia and providing its citizens in their regions access to better connectivity.
While the Ethiopian licence represents a significant opportunity for the Group to transcend national boundaries, we recognise that that there are risks associated with our investment which require identification and mitigation. These risks fall in to three categories:
- Political and regulatory
Our expectation, based on feedback from the Government of Ethiopia, and with our break-even target set at year 4, is that forex availability will have been resolved by then, long before we will need to repatriate any dividends from the business.
After diligent consideration, the consortium has determined that the identified risks are commensurate with the scale of the opportunity.
We have partnered with Vodacom Group, Sumitomo and CDC to invest in Ethiopia. Safaricom PLC and Vodacom Group, through the Vodafamily Ethiopia Holding Company Limited (a private limited company incorporated under the laws of England and Wales), Sumitomo and CDC incorporated the Global Partnership for Ethiopia (GPE) B.V., a private limited company incorporated in the Netherlands, as the Ethiopia investment vehicle.
With the USD 850 million licence fee having been paid to the Government of Ethiopia, the respective shareholding is as follows:
- Vodafamily Ethiopia Holding: 61.9% (Safaricom PLC 55.71%, Vodacom Group 6.19%)
- Sumitomo Corporation 27.2%
- CDC Group PLC 10.9%
In addition, a transaction fee of USD 4 million was paid to the International Finance corporation (IFC). The total cost was distributed in a manner proportionate to each consortium partner’s shareholding in GPE.
GPE thereafter incorporated a wholly-owned subsidiary in Ethiopia – Safaricom Telecommunication Ethiopia PLC (STE). The certificate of operation was issued on 6 July 2021 as per the requirements of Ethiopian regulations.
The indirect shareholding of Safaricom PLC in STE is 55.71%. STE’s primary purpose is to hold and operate a full-service telecommunications licence granted to GPE by the Federal Republic of Ethiopia.
After a period of negotiations and with support of ECA, we are making progress in terms of establishing a mutually beneficial partnership with Ethio Telecom on the key terms for interconnection, transmission capacity and tower sharing.
On 13 April 2022, at a meeting convened by the ECA, we reached agreement in principle with Ethio Telecom on the key terms. We are now working together with Ethio Telecom on the finalisation of these important agreements and the implementation required for our commercial launch.
As envisaged in the bid process, further negotiations are ongoing in order to conclude these agreements so as to allow us to launch a high-quality network that benefits Ethiopians.
We are encouraged by the positive outlook to the security and political situation in Ethiopia with the international community hailing the government’s efforts to foster peace. The security situation is gradually improving in Ethiopia and economic activities are back to normal in most states.
While the country has been subject to some unforeseen and unprecedented circumstances since the award of the licence to the Safaricom-led consortium, we are nonetheless working to fulfil our commitment to provide world-class services to Ethiopians in 2023 and to build the long-term foundations for our contribution to Ethiopia’s digital transformation and inclusion objectives.
The launch of our network in Ethiopia represents an opportunity in which our geographical expansion will contribute meaningfully to our vision, mission and purpose, as well as our capacity for growth, and ability to continue creating and delivering value for all our stakeholders in the short-, medium- and long-term.