Seven months into its operations in Ethiopia, Safaricom has begun to establish a foothold in the country’s telecommunications market. The company has attracted over 3 million customers, expanded its network coverage to multiple cities, and has ambitious plans to launch its mobile money service, M-PESA.
Strategic Entry and Market Potential
Safaricom’s entry into Ethiopia was a calculated move, supported by an international consortium including Vodafone, Vodacom, Sumitomo Corporation, and British International Investment. This initiative marked a significant investment of $850 million.Ethiopia, with a population exceeding 120 million and a relatively low mobile penetration rate of 57%, presents a promising market. While over 63 million people are above the age of 18, financial inclusion remains limited at 35%. These factors create opportunities for Safaricom, especially in mobile money services.
Key Developments
Safaricom has implemented measures to streamline customer onboarding, including e-KYC systems and a swift registration process. The company has set up over 5,000 acquisition points and 114 branded outlets across Ethiopia. It has also installed 1,272 network sites, with plans to double this number in the near future.The company is positioning itself as a youthful, data-driven brand, offering products like prepaid calling, home Wi-Fi, and branded devices such as smartphones and routers. Its customer-centric strategy is evident, with 90% of customers being served within two minutes at its outlets.
Financial Performance
Although Safaricom Ethiopia has generated revenue of $4 million, the venture has also impacted the parent company’s overall financial performance. Start-up costs and infrastructure investments contributed to a decline in Safaricom Group’s net income by 10.6%. Nonetheless, the Ethiopian operations remain a long-term growth focus for the company.
The Launch of M-PESA
Plans are underway to roll out M-PESA in Ethiopia by mid-2023. The service, which has been a major revenue driver in Kenya, will compete with Ethio Telecom’s Telebirr platform. Safaricom invested $150 million to secure the mobile money license, signaling its commitment to the Ethiopian market.
Challenges in Ethiopia
Ethiopia’s economic environment presents several hurdles. Inflation rates reached 34.2% in early 2023, and liquidity challenges persist. However, ongoing reforms, including the partial privatization of Ethio Telecom and plans to open the market to additional telecom operators, could create new opportunities for competition and growth.
Looking Ahead
Despite the challenges, Safaricom remains optimistic about its Ethiopian expansion. With a strategic focus on technology-driven solutions and an eye on the untapped potential of the market, the company aims to turn its Ethiopian venture into a profitable endeavor over the coming years.
