Safaricom’s Ethiopian Launch Breeds Stiff Competition For State-owned Ethio

For the last few decades, Ethiopia has had one of the world’s last closed telecom markets. Previously dominated solely by Ethio Telecom, a turn of the tide in Ethiopian telecoms sees one of Africa’s largest telcos present the state-owned carrier with formidable competition. 

In May 2022, Safaricom, beat a few bigwig bidders to secure an operating license in Ethiopia for a reported USD 850 M. Under a consortium that includes Vodafone, Vodacom, CDC Group, and Japan’s Sumitomo, the company bested MTN’s USD 600 M offer to become the first outsider telco to enter Ethiopia in the country’s 2,000-year-old history. 

In an update late last week, Ethiopia’s Finance Minister, Ahmed Shide announced the mobile money licensing of the Safaricom-led convoy, after which the telco revealed that it has officially switched on its network in Africa’s second most inhabited country—with over 115 million people. Amidst the big reveal, Safaricom’s shares in Kenya surged by at least 9 percent. 

“This will be the single largest FDI [Foreign Direct Investment] into Ethiopia to date,” Prime Minister Abiy Ahmed said in a Twitter post. “Our desire to make Ethiopia fully digital is on track. I would like to thank all that have taken part in this and for pulling off a very transparent and effective process.”

Its one and only competitor, Ethio, last year unveiled a mobile financial service known as Telebirr as it looked to turbocharge growth through offerings in cashless transactions. As of July 2022, the platform, which was developed in collaboration with Huawei, had crossed 21 million subscribers. 

However, there are many indications that the former monopolist would experience stiff competition from Safaricom, the largest telco in Kenya and the most valuable company in East Africa. The company has soaked global recognition for pioneering one of the world’s first mobile transfer services—M-PESA. 

While Ethio has at least 54 million subscribers, launched 5G in the capital, and plans to increase the count by 10.3 percent to 73.5 million next year, Safaricom is bound to shake the game up in the mobile money segment.

On the backs of M-PESA, the company has bragging rights to one of Africa’s most successful fintech stories, one that is worth around USD 3 B and looking to become a separate entity. 

Safaricom’s Ethiopian debut comes roughly a year after Ethio launched Telebirr, which already has a cumulative transaction value of USD 575 M. There might be hurdles along the road but given its track record and prospects, it might pull off a game changer. Currently, it has rolled out 2G, 3G, and 4G services in 11 Ethiopian cities, with intentions to bring the total to 25 in April 2023. 

Late last month, the Kenyan firm announced a plan in the works to build a new data center outside Addis Ababa, Ethiopia’s capital and largest city. Its third data center in the country, the prefabricated Tier-III quality telco cloud buildup would cost about USD 100 M to set up. 

Overall, these developments are ideal for not only Ethiopia’s telecommunications market but also its general economy. Ever since Ahmed Abiy assumed office as Prime Minister, the leadership has been keen on liberalizing the economy to attract foreign investments.