Safaricom has received a licence to operate mobile money services in Ethiopia, making it the first standalone foreign company authorised to offer mobile money services in the country.
Safaricom’s M-Pesa mobile money service was a trailblazer in the region and on the continent and currently operates in eight other African countries, with some 55m customers. The licence will put it in direct competition with state-owned Ethio Telecom’s Telebirr, which boasted 27.2m subscribers at the end of 2022.
Safaricom expands in Ethiopia
Kenyan telecom giant Safaricom says it has made progress in establishing itself in the Ethiopian market since its launch there as a telecoms operator six months ago.
During a recent investor presentation, Safaricom said it had acquired 2.1m 90-day active customers in Ethiopia and has a goal of reaching 10m next year. The firm has established a presence in 22 Ethiopian cities, covering 22% of the population, and generated revenues of $1.8bn within six months, according to the presentation.
Safaricom’s entry into Ethiopia, Africa’s second most populous country, became possible due to liberalisation policies that put an end to the long-standing monopoly held by state-owned Ethio Telecom. In May 2021 a Safaricom-led consortium won the country’s first independent telecoms licence with a bid of $850m. Mobile money services were excluded from the country’s telecom liberalisation at the time.
This February, the Ethiopian government announced that it would raise the size of its planned sale of shares in Ethio Telecom to 45% as it further reduces its once-dominant role in the market.
Safaricom reports that it has 909 permanent employees in the country and its activities have led to the establishment of 4,610 indirect jobs.
“Safaricom Ethiopia has committed to invest over $8 billion in the country over the next decade, with a significant portion of this investment going towards building out its telecommunications infrastructure,” said Dilip Pal, Safaricom’s chief financial officer, in an interview with Kenya’s The Standard.
Potential for growth
While Safaricom’s expansion into Ethiopia brings the potential for growth, it also demands significant investment. The company anticipates a 10.6% year-on-year decline in its overall profits for 2023 due to initial investment costs in Ethiopia. But it projects a break-even point within four years for its Ethiopian operation and a 40% profit margin after ten years.
Safaricom attributes its positive outlook to three main factors: aggressive network expansion, SIM card penetration, and the introduction of its mobile money service.
With a population of 120m and the largest economy in East Africa, boasting a GDP of $120bn in 2022 (expected to grow by 6.1% in 2023), Ethiopia presents lucrative opportunities. But the country still lags behind in terms of internet penetration and financial inclusion, which stand at 16.7% and 35% respectively.
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