A Consortium Led by Safaricom Wins Ethiopia Telco License

The Safaricom led consortium has been awarded a telecommunications licence to operate in Ethiopia by the Ethiopian telecommunications regulator.

The consortium which includes Vodafone and Vodacom, British development finance agency CDC group and Japan’s Sumitomo Corporation paid a total of $850 million (Ksh 91.8 billion) for the licence.

Ethiopia is one of the world’s last major closed markets with a population of over 100 million. The government hopes that by opening the telco market, 1.5 million jobs will be created directly and millions of online job opportunities created indirectly.

Safaricom will start by offering 4G services and hopefully introduce M-Pesa but this remains to be seen judging by the Ethiopian Prime minister’s mixed messages.

The Market reaction

Safaricom shares rose 8.2% to an all-time high of Ksh 42.75 on Tuesday as investors rushed to buy the company’s shares following the news of the successful bid

Investors were excited by the huge growth potential in the Ethiopian market whose huge population offers a penetration rate of 44%.

The share price rally comes after last week’s drop from the previous all-time high. This was after Safaricom delivered a disappointing full-year earnings report which saw it post a 6.8% drop in profits.

What this means for you

Safaricom’s share price has risen by 24.8% per cent this year alone, having risen from a low of Ksh.34.25. With their sights now set on the Ethiopian market, it is expected that they will grow their revenues and profits and this will be reflected in their share price.

Safaricom shares are a good addition to your investment portfolio if you plan on investing in the stock market for the long term. For more information about how to invest in the Nairobi Securities Exchange (NSE), please read this article.