Safaricom share value depends on Ethiopia

In Summary

• Safaricom is about to launch mobile telephony and mobile money in Ethiopia

• The Safaricom share price has more than halved in the last two years

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

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