The Safaricom-led Global Partnership for Ethiopia (GPE) has emerged sole winner of a telecommunications licence to operate in the country. According to an official statement from the Ethiopian Communications Authority (ECA), the consortium will invest over $8 billion in its telecom sector over the next ten years.
The consortium, led by Safaricom with a 56% stake, includes Japan’s Sumitomo (25%), CDC Group (10%), Vodacom (6%), Vodafone and the UK sovereign investment fund. Ethiopian Prime Minister, Abiy Ahmed disclosed that the group won the new licence after submitting a financial bid to the tune of $850 million.
Kenyan telco giant, Safaricom had recently raised its controlling stake in the global partnership to 56% from an initial 51% after it was shortlisted alongside the MTN consortium in the race to win telecom licenses in Ethiopia. Other operators including Orange, Etisalat, Telkom SA, and Liquid Telecom pulled out of the bidding process.
Safaricom’s entrance into Ethiopia marks an end to the decade-long telecom monopoly in the country’s telecom market.
Big win for Safaricom as it expands African footprint
Safaricom saw off competition from MTN Group and the Chinese Silk Road Fund consortium in the final lap of Ethiopia’s year-long telecoms privatisation process.
In doing so, Safaricom has expanded beyond the shores of Kenya into another Eastern African country, Ethiopia with the second-largest population on the continent after Nigeria.
Up to 70 million people in Ethiopia are not connected to any mobile network, presenting a huge market for Safaricom.
This is a big win for the Kenyan operator, particularly as Ethiopia will now allow the telco to deploy its mobile money service, M-Pesa starting from May next year.
M-Pesa is easily Safaricom’s biggest revenue stream, accounting for 33% ($770 million) of the telco’s service revenue in FY 2020. There are only about 1.2 million mobile money subscribers (M-Birr) in Ethiopia. Ethio Telecom has just launched its TeleBirr mobile money service this May, hence giving so much room for another player like M-Pesa.
With over 40 million users, M-Pesa’s imminent launch in Ethiopia means it will be present in eight African countries including Kenya, Ghana, Egypt, the Democratic Republic of Congo, Mozambique, Tanzania, and Lesotho.
Moreover, Safaricom is the only operator apart from MTN and Vodacom to have launched 5G networks on the continent. Thus it is finely poised to roll out high-speed internet connectivity in Ethiopia.
MTN misses out
It is maybe not so surprising that two of Africa’s largest telecom operators, MTN and Safaricom were at the forefront of seeking entry into Ethiopia’s closed telecoms sector.
However, MTN has now missed out on what could have passed as a momentous opportunity to cement its dominance in Africa’s telecom market.
With over 260 million subscribers across Africa, MTN still controls the biggest share of the continent’s mobile subscribers.
The sheer size of Ethiopia’s potential mobile subscribers was perhaps a big enough incentive for the telco giant to proceed with its deadline day bid.
While there are still investment risks posed by the political turmoil in Ethiopia’s war-torn Tigray region, the fact that mobile money restrictions were lifted would have presented a massive opportunity for MTN’s MoMo service.
It is not very clear why MTN didn’t make the cut, with the ECA having previously stated that it would award two new licences to incoming operators.
Safaricom is now in direct competition with state-owned Ethio Telecom and it would be interesting to see how this plays out going forward. But for now, one thing is certain – Africa’s last telecom monopoly has finally come to an end.