Safaricom share value depends on Ethiopia

The Safaricom share price dropped to Sh14.80 this week after it announced profits of Sh42 billion compared to Sh68 billion last year. In mid-2021, the Safaricom share price was almost Sh45.

The government-backed Hustler Fund competes with Safaricom's very profitable Fuliza lending app but it has only dropped 9 percent in revenue. The shift from voice to data has dented profitability.

Yet Safaricom remains a very profitable company that has bet heavily on an investment in Ethiopia where it has just got a licence to operate M-Pesa.

It is heavy investment in Ethiopia that has depressed Safaricom profits. So is that a good investment or not?

Ethiopia is a country of 120 million people without a telecom company of Safaricom's quality and efficiency. Potentially Ethiopia can be hugely profitable for Safaricom.

But there are two risk factors. The first is war – Ethiopia is riven by regional rivalries at the moment. Secondly, Ethiopia is very statist – will they allow a private company to establish a quasi-monopoly as Safaricom presently has with mobile money in Kenya?

So, depending on your analysis of Ethiopian geo-politics, Safaricom shares may be a great buy at the present price, or not.

Quote of the day: "Women want love to be a novel, men a short story."

Daphne du Maurier
The English novelist was born on May 13, 1907