Safaricom Ethiopia expected to break even in four years

The latest growth projections were made by Vodacom Group. The South African telecom giant currently owns 35% direct stake in Safaricom Plc and an additional 6.2% interest in the consortium that recently won the bid to operate Safaricom Ethiopia.

According to Vodacom Group's growth forecast which is contained in its latest annual financial report, Safaricom Ethiopia is expected to break even in four years following commercial launch in 2022. In addition, the company is expected to record Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin of 40% in just 10 years.

"Safaricom provided an update on our Ethiopian consortium noting an improved outlook for the security and political situation in the country. The licence unlocks a unique opportunity for our consortium to build out world-class services in Africa’s second largest country by population, providing a long-term growth vector for Safaricom," said a part of the report by Vodacom Group.

These projections are quite ambitious, especially the one about EBITDA margin. That's because Safaricom Plc, which was established in 1997, currently has an EBITDA margin of 51.7%; after 25 years of operations. So, it would be interesting to see its subsidiary actualise 40% EBITDA margin in 10 years.

We do acknowledge, however, that there are boundless growth opportunities for Safaricom in Ethiopia. For one, the company is entering the Ethiopian market as the first private telecom operator in a country that has the second largest population size in Africa. For the foreseeable future, its only major competitor would be state-owned Ethio Telecom. So, it has the opportunity of entering a large market size with fewer competitors.

More so, there is no doubt that Safaricom will try as much as possible to replicate the same strategies that helped it scale in Kenya.

In the meantime, Safaricom has made significant investments in the Horn of Africa country in preparation for the anticipated launch. In February, the company unveiled its multi-million dollar data centre which was constructed by Nokia and Huawei. It has also reached agreements with both Ethio Telecom and Ethiopian Electric Power to either share or lease telecom tower assets and dark fibre optic infrastructure.