Safaricom is investing an initial Sh67 billion ($600 million) in Ethiopia where it is setting up a new telecommunications operation in partnership with other firms, including its parent company, Vodacom Group.
The amount represents the telco’s contribution to the start-up costs and operating licence for, which the consortium paid $850 million (Sh94.9 billion).
Safaricom is the majority shareholder in the Ethiopian business with a 55.7 per cent equity.
The consortium will also spend more on infrastructure and other costs to operationalise the business.
“We are expecting a capital expenditure of between $1.5 billion (Sh167 billion) and $2 billion (Sh223 billion) over the next five years to meet the licence coverage obligations,” Safaricom’s chief executive Peter Ndegwa said of the additional Ethiopia investments.
“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 target may be significantly impacted by the impact of the current conflict on the launch of operations, which we target by mid-2022.”
Building telecoms infrastructure
Safaricom says it will finance the big-ticket investments through its own funds and loans from local banks and development finance institutions.
The telco has already borrowed Sh43 billion to fund a portion of the Ethiopian investment.
The consortium pledged to invest a total of $8 billion (Sh894 billion) over 10 years, including the cost of building telecoms infrastructure.
Details of the Ethiopian investment were made as the telco published results for its half year ended September which saw net income rise 12.1 per cent, helped by revenue growth as the telco reinstated charges on M-Pesa transactions of less than Sh1,000.
Sales increased 17.5 per cent to Sh146.3 billion, with the mobile money platform M-Pesa leading the revenue growth.
Safaricom did not declare an interim dividend, indicating that its first mid-year payout of Sh0.45 per share made for the previous half year was a one-off. BY DAILY NATION