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Safaricom positive about Ethiopia operations despite war

ethiopia-military

A member of the Ethiopian military force holds the Ethiopian national flag whilst sitting on the shoulders of newly recruited members of the military during a farewell ceremony for new recruits joining the Ethiopian military force to Tigray, organised by the Mayor in Addis Ababa on July 27, 2021. AFP PHOTO | NMG

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Summary

  • Safaricom expected to break even in the fourth year of its Ethiopia operations, said Safaricom chief executive Peter Ndegwa on Wednesday at a virtual investor briefing.
  • The Safaricom consortium, which also includes British development finance agency CDC Group and Japan’s Sumitomo Corporation, won the licence with a bid of $850 million (Sh91.75 billion) and aims to start operations in Ethiopia next year.

Kenyan telecommunication giant Safaricom #ticker:SCOM said on Wednesday the Ethiopia crisis might have a long-term impact on its operations but maintained it was positive about its long-term outlook.

Safaricom expected to break even in the fourth year of its Ethiopia operations, said Safaricom chief executive Peter Ndegwa on Wednesday at a virtual investor briefing.

The Safaricom consortium, which also includes British development finance agency CDC Group and Japan’s Sumitomo Corporation, won the licence with a bid of $850 million (Sh91.75 billion) and aims to start operations in Ethiopia next year.

It plans to launch commercial operations by mid-next year.

"Our break-even target may be significantly impacted by the impact of the current conflict on the launch of operations which we target by mid-2022," said Mr Ndegwa.

"We hope for a fast and peaceful resolution to the current situation."  

Mr Ndegwa confirmed that Safaricom staff are all safe adding that the operator is in touch with Ethiopian authorities on its licence obligations.

"We are in contact with the relevant (Ethiopian) authorities. We are confident and looking forward to launching commercial operations as projected whilst cognisant of the current evolving situation in Ethiopia," he said.

Safaricom has evacuated some of its employees from Ethiopia because of armed conflict and civil unrest in what could disrupt the firm’s operations in the populous nation.

A number of nations, including the United States, Denmark and Italy, have asked their citizens in Ethiopia to leave while commercial flights were still available, as Tigrayan rebel forces and their allies advanced towards the capital Addis Ababa.

Prime Minister Abiy Ahmed’s government, which has been embroiled in a year-long war against the Tigrayan forces, has promised to keep fighting despite calls for a ceasefire from African nations, Western states and the UN Security Council.

The conflict has killed thousands of people, forced more than two million more from their homes and left 400,000 people in Tigray facing famine.

The war is threatening the stability of Ethiopia, Africa’s second-most populous country seen by Kenyan major companies, including Safaricom, as a promising frontier for investment.

The conflict has kept investors on edge, even as it triggered a hunger crisis, leaving millions of people in need of humanitarian aid.

Ethiopia’s award of a new telecoms licence paves the way to open the market of more than 110 million people to international investors for the first time, a key part of Prime Minister Abiy’s economic strategy.

The licence has been awarded for an initial period of 15 years. Safaricom owns a majority stake in the consortium.