- Safaricom is shortlisted for six companies allowed to bid on one of two Ethiopian telecommunications licenses to be offered this year.
- The Ethiopian Communications Authority has reduced the list of 12 consortia that have expressed interest in entering the country’s telecommunications market.
- The companies will have to submit their technical and financial bids by April 5, compared to the previous deadline of March 5.
Safaricom # ticker: SKOM is shortlisted for six companies that are allowed to bid on one of the two telecommunications licenses in Ethiopia that will be offered this year.
The Ethiopian Communications Authority has reduced the list of 12 consortia that have expressed interest in entering the country’s telecommunications market.
The companies will have to submit their technical and financial bids by April 5, compared to the previous deadline of March 5.
Safaricom, which last year expressed interest in a consortium with Vodafone and Vodacom, signed a $ 500 million ($ 557 billion) loan from the US International Finance Corporation (DFC) Sovereign Wealth Fund for financing the expansion in Ethiopia
“There are about five to six consortia that are qualified to bid. “The bids should be submitted in April,” Safaricom President Michael Josephsef said in an interview. “We are working on the final submission around March / April.”
The telecommunications industry of the African nation is considered a great prize due to the huge size of the market, which serves more than 100 million people.
Ethiopia continues to auction off new licenses and sell a 45 per cent stake in state-owned monopoly Ethio Telecom, despite military conflict in the northern Tigray region.
Winners will be given full operating licenses but will not be allowed to offer mobile-based financial services such as M-Pesa, government officials said last year.
They will also be required to set up their own network infrastructure, such as cell phone towers.
Financial investment in Ethiopia is expected to peak at $ 1 billion (Sh111 billion Sh), with the DFC loan agreement being considered part of the project’s fundraising efforts.
Safaricom has previously said it is ready to take on more debt in its role as the majority shareholder in the consortium with a 51 per cent stake.
Vodakom has a five per cent interest in the joint venture, and the rest of the ownership is spread among unnamed strategic financial investors.
The Safaricom consortium, if successful, is likely to rely on funding from deep-pocket foreign investors, such as the DFC, given the size and international nature of investments in Ethiopia.
The Nairobi Stock Exchange’s borrowing has so far been limited to local banks, most of which have borrowed short-term debt denominated in Kenyan shillings.
The company recently raised bank lending to a new high of Sh32.7 billion to finance capital expenditures and pay dividends, with most of the debt expected to be settled by March next year.
Safaricom believes that Ethiopia, a market of more than 100 million people and a relatively weak reception of mobile and broadband services, presents significant growth opportunities.
The Ethiopian communications authority said it had received expressions of interest from a number of companies, including telecom and non-telecommunications operators, by 22 June.
These included the consortium Safaricom, Etisalat, Aksian, MTN, Orange, Saudi Telecom and Telcom SA.
The others were international projects of Liquid Telecom, Snail Mobile, Kandu Global Communications and Electromecha.
The Ethiopian Communications Authority has yet to reveal which of these companies has been rejected from the bidding.
Vodakom recently told its investors that the capital costs of potential entry into Ethiopia are still unclear.
The South African telecommunications company added that while it was limiting the consortium’s exposure to five per cent, it could increase ownership after a few years of operation.
Safaricom was allowed to lead the consortium for a number of reasons, including Kenya’s geographical proximity to Ethiopia.
“I think Safaricom will be a very good exposure in terms of geographical proximity from one perspective, but also Safaricom in terms of additional exposure to multiple areas of growth,” said Vodacom chief executive Shamil Youssef. , in a recent earnings call.
Players like Safaricom are attracted by the potential for market growth in Ethiopia, which has a penetration rate of 44 percent per 100 million inhabitants. Kenya has 52.2 million mobile phone subscribers and a penetration of 109.2 percent.
The start-up of Ethiopia’s telecommunications sector is considered one of the most lucrative in the economy, as the country sometimes opens inland to foreign investment for the first time. Addis Ababa minimizes foreign participation in the economy.
“The use and ownership of mobile phones lags far behind those of Egypt, Kenya and even Sudan, which is exacerbated when considering the penetration of mobile broadband,” the World Bank said earlier. The institution advises Ethiopia on telecommunications transactions.
In addition to selling the new telecommunications licenses, the Ethiopian government also has a minority stake in Etio Telecom, which has a monopoly on that market.
The transactions are part of Ethiopia’s economic liberalization policies.