Safaricom Sees $1 Billion Price Tag for Ethiopian License

NAIROBI (Capital Markets in Africa) – Safaricom Plc, Kenya’s biggest company by market value, expects the pricing for new Ethiopian telecommunications permits to liberalize the industry could be as much as $1 billion.

The Horn of Africa state is expected to invite bids for two new licenses this month to compete with its monopoly Ethiopian Telecommunications Corp., which is also slated for part privatization in early 2020.

The bid for the Ethiopian spectrum could be “quite high,” acting Safaricom Chief Executive Officer Michael Joseph said Friday in an interview after his company’s first-half earnings presentation.

“Then you have to spend another $1 billion dollars on the network. There are not many corporations that can do this on their own,” he said.

Safaricom intends to vie for one of the two permits in a consortium with three other firms including parent Vodacom Group Ltd. and two financial institutions, Joseph said.

Biggest Prize
While Safaricom does not rule out participating in the privatization of Ethio Telecom, it’s more keen on a greenfield operation, he told investors earlier.

Ethiopia has a population of more than 108 million people and almost 40 million active phone subscribers by the end of 2018. Ethio Telecom’s sales came in at $340.2 million in the July-September quarter, 21% more than a year earlier.

Ethiopia is “the biggest prize left in Africa from a telecom’s point of view,” Joseph said. The main challenges there would be foreign-exchange controls, a budding democracy, and yet-to-be-published industry regulations, he said.

Safaricom, whose first-half net income climbed 14% to 35.7 billion shillings ($345.7 million) after it booked 129.9 billion shillings of revenue, paid $55 million for an initial 15-year Kenyan operating license in 1999.

It will likely team up with a local financial institution because the telecommunications licenses do not allow for the mobile-money services, according to Lisa Kimathi, a senior research analyst at Standard Investment Bank Ltd. About 60% of Ethiopia’s adult population is unbanked, she said.

“I worry about the government controls in a country that is still undergoing reforms, so it might take time to realize returns,” she said.

SOURCE: Bloomberg Business News