Home East Africa Safaricom shares ride high on Ethiopian telecoms operating licence

Safaricom shares ride high on Ethiopian telecoms operating licence

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  • After the announcement by the Ethiopian authorities that the Safaricom-led consortium has bagged the $850 million (Sh91.7 billion) auction to acquire new telecom operating licence, its shares shot up.
  • On May 25th, the Telco’s share price closed at a record average of Sh 42.75 from Friday, May 22nd’s Sh39.50, as investors rushed to buy the company’s shares.

After the announcement by the Ethiopian authorities that the Safaricom-led consortium has bagged the $850 million (Sh91.7 billion) auction to acquire a new telecoms operating licence, its shares shot up. On May 25th, the Telco’s share price closed at a record average of Sh 42.75 from Friday, May 22nd’s Sh39.50, as investors rushed to buy the company’s shares. Safaricom’s share price gained almost 45.5 percent over the past 12 months. The telco was the second highest gainer on the bourse.

The consortium led by Safaricom with a 56 percent stake- Global Partnership for Ethiopia- include Vodafone, British development finance agency CDC Group and Japan’s Sumitomo. Operations in Ethiopia are expected to start next year. The only competitor was South Africa’s MTN Group. The entry of the consortium will bring to a close the monopoly of the State-owned Ethio Telecom. Excitement on Safaricom’s stock started from April onwards with the news that there are only two bidders in the auction.

Ethiopia the second-largest country in Africa by population had largely been closed to external investors. The government started opening the economy in 2019 through multiple reforms with the support of the International Finance Corporation. The award of the licence to Safaricom and the planned sale of a minority stake in Ethio Telecom has been hailed as a very bold step in opening the economy.

Entry into Ethiopia presents a significant growth opportunity for Safaricom that has dominated the Kenyan telecoms market. The telco is hopeful that Ethiopia will  open up mobile money licence to foreign firms  also so that it can replicate Kenya’s M-Pesa success story in the country.

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