Safaricom Ethiopia expected to break even in four years

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According to Vodacom Group’s growth forecast contained in its latest annual financial report, Safaricom Ethiopia is expected to break even within four years of its commercial launch in 2022. Additionally, the company is expected to record earnings before interest, taxes, depreciation and amortization. (EBITDA) by 40% in just 10 years.

“Safaricom provided an update on our Ethiopian consortium noting an improved outlook for the security and political situation in the country. The license opens up a unique opportunity for our consortium to develop world-class services in the second largest countries in Africa in terms of population, providing a long-term growth driver for Safaricom,” said part of the Vodacom Group report.

These projections are quite ambitious, in particular that concerning the EBITDA margin. This is because Safaricom Plc, which was established in 1997, currently has an EBITDA margin of 51.7%; after 25 years of activity. Thus, it would be interesting to see its subsidiary achieve a 40% EBITDA margin in 10 years.

We recognize, however, that there are unlimited growth opportunities for Safaricom in Ethiopia. On the one hand, the company is entering the Ethiopian market as the first private telecommunications operator in a country with the second largest population in Africa. For the foreseeable future, its only major competitor would be state-owned Ethio Telecom. Thus, it has the opportunity to enter a large market with fewer competitors.

More so, there is no doubt that Safaricom will try as much as possible to replicate the same strategies that helped it grow in Kenya.

Meanwhile, Safaricom has made significant investments in the Horn of Africa country ahead of the planned launch. In February, the company unveiled its multimillion-dollar data center built by Nokia and Huawei. It has also entered into agreements with Ethio Telecom and Ethiopian Electric Power to share or lease telecom tower assets and dark fiber optic infrastructure.

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