Safaricom to acquire 51 percent stake of Ethiopian Firm

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Safaricom is eyeing a 51 percent acquisition of an Ethiopian Telcom firm to expand its operations beyond the Kenyan market.

According to online sources, Safaricom is looking to borrow funds to finance the consortium, which will increase its debt portfolio and balance sheet position.

The financial investment is expected to be $1 billion or an equivalent of Kshs 109 billion.  Safaricom views the Ethiopian market as a good entry with a high population of 100 million people with low uptake of mobile and broadband services providing significant growth opportunities.

“If we are successful in the bid in Ethiopia, there’ll be additional debt taken on our balance sheet,” Ilanna Darcy, Safaricom’s acting chief financial officer, said on November 9 when the firm announced its results for the half-year ended September.

The debt is expected to be long-term compared to the short-term loans, which the Nairobi listed firm pays within one year.

The firm recently raised its bank borrowings to a net of Kshs 32.7 billion to finance its capital expenditures and dividends due to the cash constraints brought by the Covi-19 pandemic.

A statement from the Chief Executive, Peter Ndegwa, Safaricom is currently awaiting Ethiopian government approval after starting the licensing process.

Vodacom Group, which owns 35% of Safaricom shareholding, disclosed plans to enter the Ethiopian market.

Other firms that had expressed interest include Vodafone, Etisalat, MTN, Orange, Saudi Telecom Company, Kandu Global Communications, Telkom SA, Liquid Telecom, Snail Mobile, and Electromecha International Projects.

Safaricom wore the bid due to its proximity to Ethiopia and massive infrastructure in a fiber network, service operations in mobile, internet, data, voice, fixed-line, and value-added services.

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The Author of this Article is a registered Financial & Investment Analyst with Institute of Certified Investment and Financial Analyst. If your require more information Email: info@finsolutions.co.ke or +254 780216631

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