Ethio Telecom notably absent from stock exchange launch

Ethiopian Prime Minister Abiy Ahmed launched the Ethiopian Securities Exchange (ESX), his office announced, describing the move as a "major step toward modernizing the country's financial sector."

It's a launch that has been in the pipeline for some time. Indeed, Ethiopia lost its previous stock exchange just over 50 years ago, at the time of the 1974 revolution. Preparations to bring it back, as part of a broader bid to open up the country to international investment, have been in the works for years, but even as recently as late last year we didn't have a firm date for the start of the ESX.

The fact that the PM has now rung the bell, as he proudly proclaimed on X, is something of a big deal.

The first listed company on the ESX is Addis Ababa-based Wegagen Bank, which trumpeted its role as a pioneer of the new exchange and its ability to raise new capital as a result of its listing.

But there was nothing from Ethio Telecom, whose privatisation – by now an ongoing saga – has been widely linked with the launch of the ESX.

The telco launched its share sale in October, pledging offload a 10% stake in the company to investors using mobile money platform Telebirr.

Apparently, the operator had set itself a deadline of early January to sell the shares, but locally there were rumblings that it was unlike to hit such a tight target. And as Ethiopian media reports on Monday pointed out, including this one from The Reporter, those doubts appear to have been well founded. The media outlet states that the government has extended the sale period until 14 February, having failed to attract enough interest thus far.

The Reporter explains that "experts" have picked holes in Ethio Telecom's share sale prospectus, highlighting questionable and unreliable information, and figures taken from a re-evaluation of the operator's finances carried out by Deloitte over the past 12 months.

For example, the valuation of Ethio Telecom's property, plant and equipment assets rose to 130 billion birr as of June 2024 (just over US$1 billion), up from just 51 billion birr in its audited financial statements from the previous year, it noted.

Essentially, it seems investors are not feeling particularly comfortable about the information they are being given by Ethio Telecom, amongst other things, no doubt.

This is just the latest setback on the telco's road to part-privatisation. It has spent the past couple of years courting would-be international investors, only to have all those that initially showed interest ultimately back away. Orange appeared to be the most likely candidate to bid for a stake in Ethio Telecom, but e& and Veon were also linked with the company.

As a result, Ethio Telecom decided to push on with a stake sale first, then turn its attention back to the hunt for a foreign investor at a later date. This new delay will not have done much to make the company more attractive to big international telcos.

Presuming the 10% stake sale does eventually go ahead as planned, Ethio Telecom will at some point list on the new ESX. As will scores of other companies, if government confidence in the new exchange is not misplaced. But the incumbent telco has missed its chance to become the poster child for the ESX and for foreign investment in Ethiopia in general.