The 10% sell-off of Ethio Telecom is finally going ahead. In fact Reuters reports that Ethio Telecom will become the first company to list on Ethiopia’s new stock market next week when the government sells a 10% stake in the company.
The new stock market and privatisation of state-owned enterprises will, it is hoped, start to open up the country to greater private investment. That makes the floating of 10% of Ethio Telecom highly significant.
It could also be the first step towards the government divesting a further 45% stake in the operator to investors. Whether this happens, however, may depend on the response to the flotation.
Ethio Telecom may be seen by the market as a promising investment, having by far the biggest customer base out of a population of about 120 million, and holding up well against the arrival of Safaricom.
Indeed, a report in July from local paper the Reporter, looking back at the fiscal year, suggested that competition from Safaricom Ethiopia appears to have had little effect on Ethio Telecom’s growth, with the company reporting an 8.9% increase in its subscriber base to reach 78.3 million customers. It also reported stronger-than-expected revenue growth.
As of end of June 2024, Safaricom reported 4.6 million three-month active customers on its network; one-month active customers closed at 3.4 million.
Despite its healthy subscriber base Ethio Telecom has faced a few problems recently. In late July, Ethiopia floated its currency ahead of securing International Monetary Fund support, a step that needed to happen before a long-delayed debt restructuring could begin. As we reported earlier this week, due to rising operational expenses resulting from the country’s new floating exchange rate policy Ethio Telecom has now announced tariff increases across many of its services.
Safaricom may be in the same boat, but it still seems intent on rolling out an aggressive plan to grow its user base – and competition could even increase if the government relaunches the tendering process for a second private telecoms licence, a process that was abandoned late last year.
That, however, is still a long way off – if it happens – and unlikely to concern investors, given that the Ethio Telecom flotation is only a week away.
