KENYA – Safaricom, a mobile network operator, is considering buying a stake in Ethiopia’s State-owned Ethio Telecom, which has announced the sale of shares through a privatisation plan, report Business Daily.
Michael Joseph, Safaricom’s interim CEO, said that the Nairobi bourse-listed telecom operator is considering buying a stake in the world’s largest telecoms monopoly or setting shop in Ethiopia from scratch.
“We are looking at all options,” Mr Joseph told the Business Daily in interview on Safaricom’s plan to either buy a stake in Ethio Telecom or seek a licence to start operations.
Safaricom, like a number of global telecom firms including Vodafone, MTN, Orange, Etisalat and Zain, have all expressed interest in gaining access to Ethiopia’s fast-growing mobile market.
For Safaricom, an acquisition would provide an easy solution compared to setting up its own shop, which could involve buying land, putting up buildings, hiring staff, recruiting subscribers and growing market share against a dominant player like Ethio Telecom.
The telecommunications monopoly is seen as the biggest prize due to its huge protected market. Ethio Telecom’s subscriber base of 44 million makes it the biggest single-country customer base of any operator in Africa.
Players like Safaricom are attracted by the growth potential in the Ethiopian market, whose 100 million population offers the country a penetration of 44 percent.
Ethio Telecom last year generated revenues of Sh124.5 billion (US$1.2 billion), which is nearly half what Safaricom posted in the year to March.
The firm started distributing gross dividends amounting to Sh74.9 billion (US$749m) more than two-and-a-half months ahead of the scheduled payment date of November 30, underlying the strong cash flows at the telco.
“Buying Ethio is the best investment Safaricom can make. They can use the firm as a platform to launch mobile money, which has huge potential in Ethiopia,” said George Bodo, a financial analyst and director at Callstreet Investor Relations.
Safaricom last year said it was in advanced talks with the Ethiopian government to introduce the M-Pesa mobile money service in that country.
M-Pesa could transform Ethiopia’s economy, as it has done in Kenya, by allowing people to sidestep a rickety and inefficient banking system and send each other money and make payments at the touch of a button.
Safaricom joins a list of Kenyan firms that have had their eyes on Ethiopia for years due to the country’s huge population. Ethiopia has kept foreign involvement in the economy at a bare minimum.
The Ethiopian government had previously signalled that it would only sell a minority stake of up to 49 percent of Ethio Telecom. Mr Tolina was quoted as saying that it now had a specific undisclosed number in mind and that the adviser would help assess market sentiment.