Safaricom Ethiopia profitability timeline threatened by political conflict

The ongoing political conflict in Ethiopia may dent Safaricom Ethiopia profitability target expected by 2026 according to Safaricom Plc Chief Executive Officer Peter Ndegwa.

Safaricom Telecommunication Ethiopia Plc whose commercial operation is expected to be rolled out in mid-2022 is now facing uncertainty due to the current political conflicting pitting the Ethiopian Government under Prime Minister Abiy Ahmed against advancing Tigray People’s Liberation Front (TPLF) and Oromo Liberation Army (OLA).

“Together with our partners we have availed funding to support this new venture which we anticipate to break-even by year four of operations. Our break-even targets may be significantly impacted by the impact of the current conflict on the launch of operation which we target by mid-2022,” said Peter Ndegwa, Safricom Plc CEO during investor briefing on Wednesday.

Ndegwa says, Kshs. 67 billion raised through development financing institutions (DFIs), equity, local borrowing as well as internal reserves has already been paid for license fee.

The conflict which broke out last November has been escalating as the forces advance towards the capital Addis Ababa.

Various countries have already embarked on evacuation of citizens.

According to Ndegwa, its main concern now is the safety of its staff in Ethiopia currently headed by Anwar Soussa who was appointed managing director effective July 1, 2021.

“For now our priority is safety and security of the small number of employees that had already joined the organisation. We hope for a fast and peaceful resolution to the current situation. We remain committed to taking telecommunication and digital services to the people of Ethiopia,” he said.

The firm targets to recruit 1000 employees and another 150 graduates next year through its Graduate Management Programme.

From right Vodacom SA CEO Shameel Joosub, Safaricom CEO Peter Ndegwa and a representative from Sumitomo Corporation sign some documents during the awarding of the telecom licence to Safaricom and partners on June 15, 2021. PHOTO | Courtesy

Safaricom was awarded license to operate telecommunication services by Ethiopian Communications Authority in May this year under the Global Partnership for Ethiopia (GPE), a consortium that also includes Vodacom Group, Vodafone Group, Sumitomo Corporation and CDC Group.

Safaricom has lined up a capital investment of Kshs. 222 billion billion in Ethiopia within five years to support network roll out with 1000 sites expected within the first year of operation and at least 12,000 by the 10th year.

Safaricom Ethiopia is projected to break-even by fourth year of commercial operation with a projected Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin of 40% within 10 years.

Ndegwa however says, despite immense opportunities that are available in Ethiopia, implementation of market liberalisation and new regulatory framework, Investment rules and taxation, currency and forex volatility as well as land acquisition for telecoms infrastructure remain key risks.

  

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