Vodacom’s Kenyan affiliate Safaricom wants to grow its customer base in Ethiopia by as much as 70% in the current financial year as the mobile operator looks to break even in Africa’s second most populated country.
This is according to Safaricom CEO Peter Ndegwa, who told Business Day the Ethiopian unit has the potential to be bigger than its Kenyan operation, now the largest mobile network provider in East Africa, valued at 1.03-trillion Kenyan shillings, or $8bn.
Safaricom Ethiopia switched on its mobile telecom network and services in capital city Addis Ababa in October 2022, a year and half after having received a new operating licence there in May 2021.
This was the licence awarded to a private group, as the country moved to open up its telecom industry to competition after years where state-owned Ethio Telecom was the only provider.
Through its 34.9% stake in Safaricom and its 6.2% direct stake in Safaricom Ethiopia, Vodacom holds an effective 25.7% interest in the Safaricom Ethiopia business.
Safaricom contributes about 10% to Vodacom’s earnings.
“Going to Ethiopia gives us geographic exposure. Ethiopia was the only market that had one player market, and it’s the second largest economy from a population perspective in Africa. So, from a connectivity and also mobile money perspective, this is a big opportunity,” Ndegwa said in an interview.
He is happy with the unit’s growth but says questions about when the business would become profitable have loomed large with investors.
Ndegwa says investors are now much clearer about the path to profitability in Ethiopia after the announcement of Safaricom’s full-year earnings to March 2025.
“We have guided that in FY27 [Safaricom Ethiopia] will break even, from an ebitda [earnings before interest, tax, depreciation and amortisation] perspective. Ebitda is the relevant metric within the telecom sector.”
These estimates are also based on previous experience within Vodacom’s various operations.
“We’ve seen Safaricom [in Kenya], we’ve seen all the markets within Vodacom, as to how long we need to take to actually become profitable. When you go into a new country, you build a network, which is what we have started. We spent [about] $1.3bn so far in building the network.
“We are just past 3,000 base stations, which is about half of what we have in Kenya. So it’s a significant network. And by the end of this financial year we will be at 3,800, close to 4,000, which is a scale network.”
About $1.3bn has been spent so far on this network build.
The company now has 10-million 90-days active customers, with an expectation that will grow to 15 to 17-million by the end of the current financial year.
Ndegwa said this will enable the group to monetise its base at a faster rate.
Even then, more work needs to be done.
“We need to overcome the issues after the devaluation of the currency, after the reforms. That is the biggest unknown. So we need to see price increases within the market so that we recover the ARPU [average revenue per user].
Safaricom achieved revenues of $3bn for the first time in the period and is celebrating operating the M-Pesa mobile money service.
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