Safaricom, the leading telecommunications company in Kenya, has been operating in Ethiopia since October 2022, after winning a license to provide mobile services in the country; within that period, the company has invested heavily in building a world-class network in Ethiopia, focused on offering superior customer experience and earning customer loyalty. As of December 2023, Safaricom had launched 2,242 base stations, covering 33% of the population and 33 cities, including large and medium towns. Safaricom has also established the fastest data network in Ethiopia, with usage per chargeable mobile data subscriber reaching 4.76GB as at the end of Q3 FY24.

Safaricom’s network roll-out has translated into impressive customer growth, as it recorded 9.0Mn gross customer additions since launch and attained 4.3Mn 90-day active customers as of December 2023. Safaricom has also achieved a high level of customer engagement, with one-month active customer ARPU of KShs 170.13, excluding hyperinflationary impact.

One of the most exciting developments for Safaricom in Ethiopia was the launch of M-PESA, the mobile money service that has transformed the lives of millions of people in Kenya and other markets. Safaricom launched M-PESA in Ethiopia on 15 Aug 2023, after obtaining a payment instrument issuer license from the National Bank of Ethiopia (NBE).

M-PESA offers a range of services to customers, such as deposits, withdrawals, transfers, airtime and data package purchases, merchant payments, bank integration, and international money remittances. Safaricom has also partnered with 9 banks in Ethiopia to enable interoperability between M-PESA and bank accounts. Safaricom aims to expand M-PESA services to include more features, such as savings, loans, insurance, and e-commerce, in the future.

M-PESA has gained great momentum in Ethiopia, as it closed the quarter with 3.1Mn registered customers, 26.2k agents, and 43.1k merchants as of 31 Dec 2023. M-PESA also transacted KShs 18.5Bn in value and 9.2Mn in volume during the same period. M-PESA has the potential to drive financial inclusion in Ethiopia, where only 45% of the adult population had an account at a financial institution in 2020, according to NBE. The country’s National Financial Inclusion Strategy (NFIS 2021–2025) aims to increase this figure to 70% by 2025, and M-PESA can play a key role in achieving this goal.

Safaricom’s performance in Ethiopia is also influenced by the macro and political environment in the country, which has faced multiple shocks in the past few years, such as the COVID-19 pandemic, internal conflict, drought, and the effects of Russia-Ukraine war on commodity prices. These shocks have affected the economic growth, currency performance, and inflation rate in Ethiopia, which in turn have implications for Safaricom’s operations and revenues.

According to Bloomberg data, Ethiopia’s GDP growth fell to 5.6% and 5.3% in 2021 and 2022 respectively, from 6.1% in 2020, but remained above East Africa’s average of 4.7% in 2021 and 4.4% in 2022. According to IMF, Ethiopia’s economy is projected to grow by 6.2% in 2024, from an estimated growth of 6.1% in 2023, driven by the peace dividend, rebounding tourism, and the prospect of liberalizing more sectors.

The Ethiopian Birr (ETB) depreciated by 4.8% in 2023 to close the year at ETB 56.1. To address the foreign currency shortage, the government implemented several measures in September 2022, such as banning the use of foreign currency in local transactions, reducing the number of days that a returning resident can keep foreign cash, and relaxing restrictions on how much foreign currency can be brought into the country.

Inflation in Ethiopia remained below 30% for six months in a row, according to data from the statistics office. The country’s annual inflation rate rose to 28.7% in December 2023, from 28.3% in November 2023. Food inflation, which accounts for 53.5% of the Consumer Price Index (CPI), ticked up to 30.6% y/y during the month, while non-food products rose marginally to 26.1% y/y. NBE targets to reduce inflation to below 20% by June 2024 and below 10% by June 2025, by moderating credit growth and sharply reducing the direct advances to the Treasury.

Safaricom Ethiopia is funded through shareholder equity, deferred vendor payments, and third-party borrowings. Shareholders of Global Partnership for Ethiopia (GPE), the consortium that owns Safaricom Ethiopia, had contributed USD 1,614Mn by Dec 2023, including IFC, in proportion to their shareholding. This funding includes the license fee of USD 850Mn and the USD 150Mn M-PESA Investment Protection Fee. Safaricom PLC’s contribution amounts to USD 834Mn, which was partly funded through a USD 400Mn loan borrowed from a consortium of local and international banks during FY22.

The operating entity has also borrowed from the local market and is leveraged as below at varying interest rates. Also included in the table are the closing outstanding amounts for the periods under the deferred vendor payments agreements.

Safaricom has made significant progress in expanding its network and mobile services in Ethiopia and has established itself as a leading and innovative brand in the market. Safaricom has also launched M-PESA, the mobile money service that has the potential to transform the lives of millions of Ethiopians by providing them with access to digital financial services. Safaricom’s performance in Ethiopia is also influenced by the macro and political environment, which poses both opportunities and challenges for the company. Safaricom’s vision is to establish a digital future for its customers in Ethiopia, and it is committed to delivering on its purpose of transforming lives.

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