Vodacom thrilled after Safaricom-led consortium wins Ethiopia licence

By Xolisa Phillip, in Johannesburg

Posted on May 26, 2021 07:30

FILE PHOTO: A Vodacom branch in Cape Town, South Africa
A branch of South African mobile telecoms provider Vodacom in Cape Town, South Africa, November 10, 2015. REUTERS/Mike Hutchings

A telecoms consortium that includes the Vodacom Group has cracked a rare greenfield opportunity in Ethiopia after winning a coveted bid for the country’s first private-use licence in the sector.

In an interview with The Africa Report in August last year, Vodacom Group CEO Shameel Joosub described the Ethiopian market, with its more than 100 million people and low mobile penetration rates, as “the last of those greenfield opportunities that exist.”

In addition, Ethiopia having one operator, a state-run monopoly, and low financial inclusion made it a compelling prospect, Joosub said at the time.

During the interview, he also revealed that the consortium was putting the final touches to its bid presentations, documents and submissions – “and all of those types of things to ensure we put our [Vodacom’s) best foot forward.”

Furthermore, “it seems the process will culminate towards the end of the year,” the Vodacom Group CEO said at the time.

That time has come.

Strength in numbers and competition

The Safaricom-led consortium includes the Vodacom Group, the Vodafone Group, Sumitomo Corporation and the CDC Group. Kenyan-based Safaricom is part of the Vodacom Group.

Vodacom Group operates in fewer markets, but tends to be the leader or a close second wherever it sets up shop.

Now that the bid is in the bag, the next steps for the collective involves setting up an operating company in Africa’s second-most populous nation, in order to start rolling out telecoms services in 2022.

The introduction of competition in Ethiopia’s telecoms sector forms part of the country’s government-initiated Economic Reform Agenda introduced in 2019. The economic reform is backed by the International Finance Corporation, a member of the World Bank Group.

“The consortium partners have a track record for delivering transformative technology services, particularly [in] … health, education and agriculture, built on quality telecom networks. We want to make a difference to Ethiopians through promoting widespread digital inclusion as part of Vodacom’s pledge to connect the next 100 million Africans by 2025,” Joosub said on Monday 24 May, in the statement that was released by the consortium, to break the news on the bid.

Excitement all round

Safaricom CEO Peter Ndegwa expressed enthusiasm for the opportunity, while Vodafone Group CEO Nick Read noted the significance of the development for Ethiopia “which is one of the last very large markets in the world to introduce telecom competition.”

Sumitomo Corporation chief digital officer Toshikazu Nambu, who also serves as executive vice-president, said: “We plan to bring our experience in Asia and Japan, and know-how for cutting-edge digital transformation to Ethiopia.”

CDC head of Africa Tenbite Ermias added: “We are ready to roll out a state-of-the-art network that will bring vital economic opportunities to millions of Ethiopians, from urban dwellers to farmers, and to businesses large and small.”

Strategic moves

The latest development aligns with the Vodacom Group’s strategy of growth through partnerships. The other pillars of the Vodacom Group’s strategy are: build and buy. Moreover, the Vodacom Group operates in fewer markets, but tends to be the leader or a close second wherever it sets up shop.

The advantage of this approach, according to Joosub is that, “we capitalise our markets properly. The focus is beneficial for us.” “That’s worked quite nicely for us in terms of growing our share and so on,” he told The Africa Report in August last year.

Last week, the Vodacom Group released its interim results for the year ended 31 March 2021. The Group’s bet on Safaricom continued to pay dividends, according to the figures for the period under review.

During this period, the Group added 8.2 million customers, taking its total to 123.7 million, including those under Safaricom.

“Our strategic investment in Safaricom comprised almost 13% of our operating profit,” Joosub said last week.

The Vodacom Group has declared a final dividend of 410c ($0.30).

Africa, the ultimate prize

“We remain focused on entrenching the Vodacom Group as a leading pan-African technology company through our investments into financial, digital and lifestyle services as these increasingly provide opportunities to enhance our relationship with the 123.7 million customers we serve across our footprint,” said Joosub.

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