DETERMINED

Safaricom determined to enter Ethiopian market despite tough rules

The telco yesterday reported a Sh74.70 billion net profit.

In Summary

•Safaricom is confident its M-Pesa platform will transform the Ethiopian economy.

•The Ethiopian Communications Authority has drafted several directives that guide the issuance of telecommunications service licenses.

L-R:Safaricom chairman Nicholas Ng’ang’a, CEO Peter Ndegwa and CFO Sateesh Kamath after FYI 2020/21 results announcement at Michael Joseph centre in Nairobi on April 29/COURTESY
L-R:Safaricom chairman Nicholas Ng’ang’a, CEO Peter Ndegwa and CFO Sateesh Kamath after FYI 2020/21 results announcement at Michael Joseph centre in Nairobi on April 29/COURTESY

Safaricom is determined to enter the Ethiopia market despite protectionism in the neighbouring country aimed at shielding its state corporations.

Ethiopia’s central bank recently said it would only allow locally-owned financial institutions to offer mobile money services, leaving Safaricom with a GSM (Global System for Mobile Communications) option only.

New directives have however opened the market for players in other sectors of the economy, CEO Peter Ndegwa said yesterday, which gives the telco a chance to bid for a license most likely to be done through a consortium.

 

“We will consider a partnership with other entities in Ethiopia,” Ndegwa said in a post investor briefing conference call.

The Nairobi Securities Exchange-listed telco yesterday reported a 19.5 per cent rise in earnings for the year ended March 31, where net profit closed at Sh74.70 billion.

This is up from Sh62.49 billion posted in a similar period last year.

During the period, service revenue grew 4.8 per cent to Sh251.22 billion up from Sh 239.77 billion last year.

The growth was mainly propelled by Voice and M-Pesa which accounted for 34.5 per cent and 33.6 per cent of the service revenues in the year.

M-Pesa revenue grew by 12.6 per cent to Sh84.44billion. Voice service revenue shrunk by 1.4 per cent to Sh94.45billion, but remained the biggest earner for the telco.

Messaging revenue also declined by 12.3 per cent to Sh17.19 billion. Mobile data revenue however increased by 12.1 per cent to Sh40.67 billion.

 

“We expect a drop in voice and SMS going forward as people shift more into data and applications such as WhatsApp,” Chief Financial Officer Sateesh Kamath said.

Safaricom is keen to tap into the 100 million population-Ethiopian market as part of its regional growth.

Yesterday, Ndegwa said the firm will be bidding for a general telecommunication license in a planned upcoming auction, which could, however, delay as a result of the Covid-19 pandemic.

Rights to operate mobile money will, however, be sought through a partner, if it fails to secure a solo deal.

“The initial timeframe for the auction was this year but it is likely to be postponed,” Ndegwa said.

The firm is targeting both voice, data, and mobile money businesses in the country that has attracted other Kenyan institutions such as KCB Group and Equity bank.

The Ethiopian Communications Authority has drafted several directives that guide the issuance of telecommunications service licenses pursuant to the new Telecommunications Regulatory Framework.

A fourteen-day stakeholder consultation on the directives commenced on Tuesday (April 28) and will run until May 11, 2020, the Ethiopian Communications Authority announced.

The directives touch on telecommunications licensing, consumers’ rights and protection, and dispute resolution.

“We will review all submissions we receive and will consider the comments in adopting the Directives,” the authority notes.

Safaricom is competing against for a stake of the Ethiopian market against global telcos such as MTN, Orange, Etisalat, and Zain as Ethiopia plans to award permits later this year, opening the country’s telecoms market to foreign investment for the first time.

Safaricom is confident its M-Pesa platform could transform the Ethiopian economy as it has done in Kenya, mainly empowering the unbanked, easing sending of money and making of payments at points if sale.