IFC Acquires Sh22 billion Minority stake in Safaricom Ethiopia

The International Finance Corporation (IFC) has injected $157.4 million (21.9 billion) for a minority stake in Safaricom Ethiopia.

The member of the World Bank Group says It has also issued a $100 million (Sh13.9 billion) loan facility to the consortium to support the ongoing construction and operation of the firm’s greenfield telecommunications network across Ethiopia.

This is expected to lead to more affordable internet, reliable mobile connectivity and technology access for people and businesses in the country.

“This first partnership between IFC, MIGA, Vodafone, Vodacom, Safaricom, Sumitomo Corporation, and British International Investment in Ethiopia addresses the World Bank Group’s core mandate to help countries end poverty and meet their citizens’ demands for services including digital connectivity,” the lender said on Friday.

Kenya’s biggest telco is the major shareholder in the Ethiopia venture with a stake of 55.7 per cent and the entry of IFC as a shareholder could see its ownership drop to below the 50 per cent mark, reducing its exposure in the populous nation.

Vodacom Group holds a 6.19 percent share of the business. Sumitomo Corporation and British International Investment (formerly CDC Group) control stakes of 27.2 percent and 10.9 percent respectively in Safaricom Telecommunication Ethiopia Plc (STE)—which is the operating arm of the venture.

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Although details about the stake bought are scanty, market players have estimated it to 15.5 per cent stake.

“Following the transaction, IFC will hold a minority position in Safaricom Ethiopia,” the lending arm of World Bank said.

The initial partners together paid $850 million (Sh102.2 billion) towards the licence fee in 2022 after the Ethiopian government tendered to allow a private player in its telecommunications space.

The Multilateral Investment Guarantee Agency (MIGA) will provide 10-year guarantees of $1 billion to cover the equity investments of Safaricom Ethiopia’s shareholders: Vodafone Group, Vodacom, Safaricom, and British International Investment. A portion of the MIGA guarantees, $76 million, will come from the MIGA Guarantee Facility, part of the International Development Association’s Private Sector Window, in the form of a first loss layer.

Ethiopia is Africa’s second most populous country in Africa, with a population of approximately 120 million.

The investment and guarantees will help Safaricom Ethiopia roll out and operate 4G and 5G mobile networks across the country – including in rural and urban areas.

Furthermore, under a license granted in May 2023 by the Central Bank of Ethiopia, Safaricom Ethiopia also plans to launch financial services in 2023 under the brand name M-Pesa.

“IFC is delighted to announce its support to Safaricom Ethiopia, the first private sector-led telecoms operator in the country, and its parent company the Global Partnership for Ethiopia,” IFC said.

It added that through this investment, it hopes to help the company create a competitive market for mobile connectivity, reflecting on IFC’s strategy to increase competition in the digital sector globally, and reduce costs for consumers.

“Young people, small businesses, and entrepreneurs will particularly benefit from improved access to high quality digital services such as mobile financial services,” said Mohamed Gouled, IFC Vice President of Industries said.

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When it launched services in October 2022, Safaricom Ethiopia became the first private telecom operator in Ethiopia, one of the world’s last telecom monopoly markets.

According to IFC, Telecoms market liberalisation is a key part of the Ethiopian government’s Digital Ethiopia 2025 plan to help the country realise its digital potential, leverage technology to build a more prosperous society and help meet the country’s United Nations Sustainable Development Goal commitments.

Vodafone Group external affairs director Joakim Reiter said that his firm is pleased to partner with the World Bank Group in Ethiopia to help the country digitalise for the benefit of citizens and , their economy.

“By working together, we can deliver the connectivity, products and services relied upon by our customers,” Reiter said.

By increasing access to digital services, the project has the potential to help create up to 1.5 million direct and indirect jobs in Ethiopia, contribute to the country’s sustainable future growth, and increase both financial and social inclusion for Ethiopians.

“MIGA is pleased to help people in all regions of Ethiopia, as the country increases access to high-quality digital services,” MIGA’s Vice President Hiroshi Matano said.

Safaricom Ethiopia chairman Michael Joseph on other hand said the country has a large, young and entrepreneurial population that can unlock the country’s economic potential the consortium advance digitalisation.

“It is great to have the World Bank units with us as part of the international funding coalition behind Safaricom Ethiopia,” Joseph said.

The project follows more than four years of World Bank Group engagements in Ethiopia aimed at opening the telecommunications sector to private sector investment and supporting market liberalisation.

Full-service telecom licenses

In 2020, IFC advised Ethiopia’s Ministry of Finance and the Ethiopian Communications Authority in designing and tendering the nation’s first full-service telecom licenses and associated spectrum.

The license was awarded in May 2021.

IFC’s investments and MIGA’s guarantees in the digital infrastructure sector are helping to connect the unconnected and to create opportunities, particularly in Africa and in fragile and conflict-affected countries.

Over the last decade, IFC committed and mobilized more than $7 billion in digital infrastructure and services, with more than $2.5 billion committed between July 2020 and June 2022.

MIGA’s contribution to the enhancement of the digital infrastructure reached $1.87 billion over the last decade, mainly in fragile and conflict affected countries.

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