(4 minutes read)
· A consortium led by Safaricom has received a boost after their US financier was granted a special approval to fund the telcos’ entry into Ethiopia, notwithstanding the US sanctions against Addis Ababa
· Safaricom’s disclosure followed responses to analysts’ conference calls where the telecoms firm was asked how it planned to navigate the US sanctions in reference to the DFC loan
· The license has been awarded for an initial period of 15 years. Safaricom owns a majority stake in the consortium
A consortium led by Safaricom has received a boost after their US financier was granted a special approval to fund the telcos’ entry into Ethiopia, notwithstanding the US sanctions against Addis Ababa.
The telcos expansion plan in Ethiopia was complicated when the US International Development Finance Corporation (DFC) paused on investments despite agreeing to offer the consortium a US$500 million loan (Sh53.9 billion).
Safaricom said that the US State development financier was granted approval to make select investments in Ethiopia. This includes funding UK’s Vodafone and South Africa’s Vodacom Group Ltd.
The Sh53.9 billion financing had been thrown into doubt over US economic sanctions against Ethiopia triggered by violence in the northern Tigray region, which took heavy toll of men and materials.
Safaricom’s disclosure followed responses to analysts’ conference calls where the telecoms firm was asked how it planned to navigate the US sanctions in reference to the DFC loan. The company won the license with a bid of $850 million (Sh91.6 billion) and aims to start operations in Ethiopia next year. The new telecoms license paves the way to open the market of more than 110 million people to international investors for the first time, a key part of Prime Minister Abiy Ahmed’s economic strategy.
The license has been awarded for an initial period of 15 years. Safaricom owns a majority stake in the consortium.
Another partnership led by MTN Group Ltd, Vodacom’s Johannesburg rival, and the Silk Road Fund, a Chinese State investment group, was turned down after bidding $600 million. Ethiopia still intends to sell two more licenses, and said it will invite a new round of offers from international carriers after some policy adjustments.
The government is also looking to sell a minority stake in Ethio Telecom, the State monopoly. The transactions are part of economic liberalization policies by a country which is seen as presenting major growth opportunities.
Ethio Telecom had revenues of US$604 million (Sh64.3 billion) in the six months to end of December 2020. Safaricom’s half-year sales to September stood at Sh118.4 billion. A telecoms monopoly, Ethio Telecom is seen as the biggest prize due to its huge protected market. Its subscriber base of 50.7 million makes it the biggest single-country customer base of any operator in Africa.
