telecom

Safaricom wary of Addis as profit rises to $334m

November 14, 2021

Kenya’s leading mobile phone operator Safaricom is cautiously optimistic about its operations in Ethiopia following an escalation of conflict that has displaced more than two million people from the war-torn Tigray region.

Safaricom through a consortium — Global Partnership for Ethiopia — was awarded a licence by the Ethiopian government to provide telecom services in the country barely six months ago (May 24) in a ceremony attended by President Uhuru Kenyatta in Addis Ababa.

The consortium was awarded ‘Licence A’, which contains an attractive spectrum for operating a GSM business for an initial term of 15 years with a provision to apply for renewal for an equal term.

However, uncertainty now surrounds the planned multibillion dollar investment into the Horn with fears that the conflict in the Tigray that is now spreading towards Addis Ababa could push the country into civil war and destabilise the economy.

Safaricom, which has over 31 million customers in Kenya, has already evacuated an undisclosed number of staff out of Ethiopia and said it is assessing the volatility of situation and how it will likely impact the commencement of operations mid next year.

Safaricom Chief Executive Peter Ndegwa told reporters in Nairobi that the board is evaluating the crisis and its possible impact on the commencement date, but maintained that the company is committed to meeting its licensing conditions within this period.

Ethiopia’s nascent telecommunications sector is considered one of the most lucrative in the economy as the once tightly state-controlled economy opens up to foreign investments for the first time.

The mobile financial services in the country has also been opened to competition effective May 2022 allowing Safaricom to introduce its popular M-Pesa payment platform in the market of about 110 million people.

“We are in the process of setting up our operations, preparing detailed plans for operational readiness ahead of our commercial launch next year. We are in contact with authorities in Ethiopia updating them as per our licence,” said Ndegwa.

Safaricom finds Ethiopia an attractive market with a huge population (median age at 17 years), growing GDP averaging seven percent over the past seven years.

In addition, the country has a high growth opportunity, low penetration of services (telecoms at 43 percent and mobile financial services at less than 2 percent)

MPesa contribution

“We look forward to launching commercial operations as projected, while cognizant of the current evolving political conflict in Ethiopia, as we proceed with our plans adapting to and assessing the situation as it evolves,” said Ndegwa.

Net profit for the six months to September 30 grew by 12 percent to Ksh37.1 billion ($334.23 million) from Ksh33.1 billion ($298.19 million) in the same period last year riding on increased revenues from MPesa.

“The pandemic dealt a major blow to the economy in 2020 but we are encouraged with the gradual recovery recorded across major sectors of the economy including agriculture, manufacturing and tourism,” said Ndegwa.

Its total revenues increased by 17.5 percent to Ksh146.36 billion($1.31 billion) from Ksh124.53 billion($1.12 billion) in the same period last year, with M-Pesa revenues growing by 45.8 percent to Ksh52.32 billion($471.35 million) from Ksh35.88 billion($323.24 million).

Service revenues grew by 16.9 percent to Ksh138.4 billion ($1.24 billion) from Ksh118.4 billion ($1.06 billion), with M-Pesa accounting for 37.8 percent of these.

Mobile data revenue increased by 6.3 percent to Ksh23.6 billion ($212.61 million) from Ksh22.2 billion ($200 million) while voice revenue increased by 3.2 percent to Ksh41.5 billion ($373.87 million) from Ksh40.2 billion ($362.16 million) in the same period last year.

The fighting in Tigray started in November last year after forces loyal to the Tigray People’s Liberation Front seized military bases in the region, just three months after the Central Government postponed a planned general election, citing the pandemic.

The Global Partnership for Ethiopia consortium led by Safaricom comprises Vodafone and Vodacom, British Development Finance Agency CDC and Japan’s Sumitomo Corporation won the telecom licence.

The consortium paid $850 million for the licence and committed to inject $8 billion worth of investment in the economy over 10 years, the largest FDI into Ethiopia to date, Prime Minister Abiy Ahmed said.

theeastafrican



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