Vodafone has minimal involvement in Ethiopian consortium

Vodafone was part of the consortium that won a new Ethiopian telecoms operating licence, but its direct involvement is minimal and will come solely through its existing African shareholdings.

We know that as a result of the publication by another consortium member – Safaricom – of the shareholder structure of the winning bidder.

The operating company that will launch services in Ethiopia next year will be controlled by Safaricom with a 55.7% stake. The next biggest shareholder is Japan’s Sumitomo Corp with 27.2% followed by the UK’s CDC Group at 10.9%, while South Africa telco Vodacom holds 6.2%. Vodafone is not on the list, which begs the question why it was included in releases from the Ethiopian Communications Authority (ECA), aside from the fact that it is the biggest shareholder in both Vodacom and Safaricom.

The inclusion of the Vodafone name makes the whole process look a lot more global, of course, which could well have been a concern for the Ethiopian government after the long-awaited privatisation process failed to attract as much international attention as it had hoped; the ban on providing mobile money services doubtless had something – if not everything – to do with that.

As an aside, incumbent Ethio Telecom has reportedly experienced huge interest in its telebirr mobile money service, launched earlier this month safe in the knowledge it would have a market monopoly for a year or so. According to Quartz Africa, the service attracted 1 million registrations in less than a week.

The state was not entirely playing it fast and loose with the Vodafone name though. The mobile group’s Vodafone International holds a single share in Vodafamily Ethiopia Holding, a UK-based outfit owned by Safaricom (90%) and Vodacom (10%). Vodafamily – which plans to change its name and move to Kenya – effectively houses Safaricom and Vodacom’s stakes in the new Ethiopia operating company.

It’s also worth noting that US government-backed Development Finance Corporation (DFC), listed as part of the winning consortium by the ECA, is also missing from the list of shareholders, but that’s not altogether a surprise, since its role was in providing financing for the bid.

Its very presence has triggered a raft of rumours that the whole privatisation process in Ethiopia has become mired in the politics of the US-China trade war. The DFC reportedly agreed to back the winning group provided it committed to using non-Chinese equipment in its network build-out, although as yet there is no concrete evidence of that. The fact that the second bidder, led by South Africa’s MTN and backed by China’s Silk Road Fund and other unnamed private equity outfits, failed to secure a licence even though there were two available seems to lend credence to that report…but then again it could all be about money.

Safaricom has formally confirmed that it bid US$850 million for its licence, while MTN’s bid came in $250 million lower. The telco’s chief executive Ralph Mupita told Connecting Africa that he was disappointed with the outcome but stuck by the disciplined $600 million offer he and his equity partners submitted.

It may well be that MTN and others who were expected to take part in the licensing contest but did not – Orange and Etisalat were the two most commonly named – will come back to the table if and when the state gets around to selling that second licence. In the meantime, the Safaricom group has a head start and it looks like it is aiming to hit the ground running.

The telco said its next job is to form its Ethiopian operating company and satisfy various conditions relating to the issue of the licence, with a view to launching commercial operations in 2022.

“Ethiopia, with an estimated population of approximately 112 million and reported economic growth rate of 8.3% in 2019 (World Bank data), represents an attractive new market for Safaricom to expand into given that Safaricom operates in a neighbouring country and sees the opportunity to deploy similar solutions to help overcome the economic challenges that both countries have in common, e.g. in their education, health and agriculture sectors,” Safaricom said.

One comment

  1. Avatar Martin El 26/05/2021 @ 5:36 pm

    Safaricom was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone Group PLC of the United Kingdom acquired a 40% stake and management responsibility for the company.

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