Safaricom sticks with June 2022 timeline for Ethiopia entry albeit uncertainties

Kenya’s leading telecoms operator Safaricom has locked in June 2022 as the target for starting commercial operations in Ethiopia.

This is despite uncertainties surrounding the stay of an ongoing political crisis which could very well push back Safaricom plans in the country at least in the interim.

In spite of recently pulling out staff from Ethiopia to ensure their safety, Safaricom says planning continues remotely where at present, the operator is gearing for the deployment of network and IT equipment.

“We are fully committed to meeting our license obligations and are confident and looking forward to the project while being cognizant of the current evolving situation. For now, our priority is safety and security for the small number of employees who had already joined the organisation. We hope for a fast and peaceful resolution to the current situation,” said Safaricom Plc CEO Peter Ndegwa on Wednesday.

“Clearly the current situation may affect some of that planning. We can’t really comment on whether there will be a delay until a couple of weeks from now when we can assess where the situation is. If the current situation continues, we would be able to make an assessment and inform you on any impact on the time-frame.”

Safaricom plans to spend between Ksh.167.7 billion ($1.5 billion) and Ksh.223.6 billion ($ 2 billion) in the next five years to set up the Ethiopian operations.

The telco estimates spending at Ksh.67.1 billion ($600 million) in the first year including making licensing payments while it expects to break even in the fourth year and have pre-tax margins of 40 per cent by the 10th year.

Safaricom expects the drivers of growth in Ethiopia to be self network expansion initiatives, low Sim Card penetration, digital services and mobile money which is subject to a license award.

The operator however sees multiple headwinds to the expansion campaign including evolving investment rules and taxation, ongoing political conflict, currency volatility, foreign exchange availability and securing access to land and buildings.

Additionally, Safaricom faces funding pressure with part of international development financiers pulling back on loan disbursements for the expansion project.

Safaricom Plc Chief Finance Officer Dilip Pal nevertheless states the initial phase of the project remains substantially funded.

“We are not depending on on source of financing. As a consortium, we have looked at all options. We are still engaging with all DFI’s including DFC as one of the options for our future needs. At this point in time and in the immediate future, the entity is fairly funded and all our consortium members are committed to ensure the entity is well funded,” he said.