Kenyan telecoms giant Safaricom has announced plans to tap into Ethiopia's local bond market in a bid to fund its expansion across the East African nation.
Safaricom entered the Ethiopian market in 2021 after winning a license through an international bidding process worth 850 million dollars. This marked its first foray outside of Kenya, as it looked to capitalize on growth opportunities in Africa's second most populous country.
Currently, after over a year of operations, Safaricom Ethiopia has amassed a strong customer base. It boasts 4.4 million 90-day active mobile subscribers on its network and 4.5 million registered users of its M-Pesa mobile money platform. M-Pesa also processed over 31.5 million transactions valued at 56 billion Ethiopian birr (KES 24.5 billion) in total during this period.
On the infrastructure front, Safaricom Ethiopia has rolled out services across 2,806 telecom towers. This is supported by a merchant network of 62,700 active agents. The telco now covers a significant portion of Ethiopia's population and is expanding nationwide.
However, building extensive mobile and financial networks across a large frontier market like Ethiopia requires huge investments. Speaking to Business Daily, Safaricom CFO Dilip Pal revealed plans to tap into local currency debt financing opportunities through an inaugural bond issue.
Pal said the Nairobi-listed firm is targeting to raise 100-150 million dollars through the issuance of birr-denominated bonds. This would equate to 8.6 billion birr if issued at the higher end. The funds would aid Safaricom's continued capital-intensive expansion drive across Ethiopia.
The financing is timed for when Ethiopia's fledgling capital market regulator officially launches the country's securities exchange in Q3 2024. This will allow Safaricom to become the first international firm to access local currency debt through Ethiopia's debut bond market.
Safaricom aims to achieve profitability for its loss-making Ethiopian operations by 2026. Market experts say the local debt issuance aligns Safaricom's strategy with risks in Ethiopia.
Funding expansion through domestic currency financing mitigates foreign exchange volatility while boosting the infrastructure, enabling Ethiopia's ongoing development.
