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Safaricom to consider bid for Ethiopia permit offers

Safaricom Headquarters
Safaricom Headquarters along Waiyaki Way. FILE PHOTO | NMG  

Safaricom has been offered a path to enter the Ethiopian market after Addis Ababa issued a timetable for the auction of two new telecoms licences.

Ethiopia said last week that it plans to award the permits by April next year and firms keen on bidding have until November 22 to show interest, opening the country’s telecoms market to foreign investment for the first time.

Safaricom has expressed interest in either buying a stake in State-owned Ethio Telecom, which is up for sale, or setting shop in the country from scratch.

Michael Joseph, Safaricom's interim CEO, said last week that the Nairobi bourse-listed telecom operator was consulting on the bidding process even after earlier talking of plans to acquire a stake in Ethio Telecom.

"We don’t know at this stage. We will decide after the consultation period," Mr Joseph said in reference to next month’s deadline.

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Safaricom, like a number of global telecom firms including Vodafone, MTN, Orange, Etisalat and Zain, have all expressed interest in gaining access to Ethiopia’s fast-growing mobile market.

For Safaricom, an acquisition would provide an easy solution compared to setting up its own shop, which would involve buying land, putting up buildings, hiring staff, recruiting subscribers and growing market share against a dominant player like Ethio Telecom.

"The Ethiopian Communications Authority (ECA) intends to issue two additional licences for telecommunications services operators through a competitive process pursuant to the Communications Services Proclamation of Ethiopia," the regulator said in a statement.

Players like Safaricom are attracted by the growth potential in the Ethiopian market, whose 100 million population offers the country a penetration of 44 percent. Kenya’s 52.2 million mobile phone subscribers gives it a penetration of 109.2 percent.

Mobile money platform M-Pesa could transform Ethiopia’s economy, as it has done in Kenya, by allowing people to sidestep a rickety and inefficient banking system and send each other money and make payments at the touch of a button.

The ability to access digital banking services is likely to be a game-changer for Ethiopians whose banking sector has no way of transfering funds from one bank to another.

Safaricom joins a list of Kenyan firms that have had their eyes on Ethiopia for years due to the country’s huge population. Ethiopia has kept foreign involvement in the economy at a bare minimum.

The country has consistently registered robust economic growth, averaging 10 percent in the past five years and its ongoing economic reforms look set to strengthen investor sentiment.

Its population, which is the second largest in Africa after Nigeria, offers immense opportunities for business.

Addis Ababa has plans of issuing the two new telecoms licences together with the sale of Ethio Telecom as part of a "synchronised process."

It plans to announce both the share sale and the licensing process in March next year.

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