Safaric*m shares hit new high on Ethiopia big win
Safaricom shares yesterday hit a historic high after news filtered out over the weekend that a consortium comprising Safaricom and other global players won a bid to operate telecom services in Ethiopia.
A senior adviser at the Ethiopian Ministry of Finance Brook Taye announced on Saturday that the Safaricom consortium had edged out another consortium led by MTN Mauritius to clinch the Ethiopia telco deal.
Dubbed the Global Partnership for Ethiopia, the consortium is led by Safaricom Plc, a partner member of the Vodafone Group, and will establish a new operating company in Ethiopia which aims to start providing telecommunications services from 2022.
The partnership include Vodacom Group; Vodafone Group; Sumitomo Corporation – one of the largest international trading and business investment companies; and CDC Group - the UK’s development finance institution and impact investor.
Reacting to the positive move, Safaricom shares price yesterday rose to a historic high of Sh43.45, within the first five minutes of opening trade. This is a 10 per cent rise compared to Friday last week when the share closed at Sh39.50.
According to Churchill Ogutu, the head of research at Genghis Capital, the gain in share price is an indication that investors feel the move into Ethiopia is the right one for the telco.
He said considering that Safaricom’s voice and SMS market in the country has hit a plateau, entry into Ethiopia would come as a much needed boost.
Additionally, he said there is a possibility that Safaricom could be allowed to set up a mobile money operation in Ethiopia in about three year’s time. “From that perspective, Ethiopia is a virgin market and their population is really high.
Secondly, the bigger picture is now if Safaricom will be allowed to operate M-Pesa in that market,” he said.
Ethiopia is home to over 112 million people, making it the second largest country in Africa by population and is among the last countries to introduce competition in the telecom industry globally.
Market liberalisation has followed a rigorous process started by the government in 2019 as part of its Economic Reform Agenda, with the support of the International Finance Corporation.
The reforms aim to increase jobs, reduce poverty and grow the local economy in an inclusive and sustainable manner.
Consortium partner
Shameel Joosub, CEO, Vodacom Group, said: “The consortium partners have a great track record for delivering transformative technology services, particularly when it comes to health, education and agriculture, built on quality telecom networks”.
“We want to make a real difference to the lives of Ethiopians through promoting widespread digital inclusion as part of Vodacom’s pledge to connect the next 100 million Africans by 2025,” he added.
“In past years, we have seen the power of digital transformation and its impact on our customers.
We believe by working with all stakeholders in Ethiopia, we can deliver a similar transformation while achieving a sustainable return to our shareholders,” said Peter Ndegwa, CEO of Safaricom.
Safaricom will incur significant capital expenditure as it will not be allowed to ride on the Ethiopian infrastructure but rather will have to set up own from scratch.
“It will have to incur some cost building up infrastructure from scratch instead of piggybacking on what Ethiopia is currently using.
“Primarily, the benefits will start kicking in in the long term. In the short term they will have to spend as they slowly start to build up their infrastructure,” said Ogutu.
Cytonn Chief Investments Officer, Elizabeth Nkukuu said it is a good thing for them because with diversification it means growth realised can be more. “The growth can only be good for shareholders,” she added.
