Flash Report /

Ethiopia at war: Safaricom flees

  • Ethiopian crisis intensifies – rebels reportedly close in on Ethiopia’s capital

  • Unconfirmed press reports indicate that Safaricom has evacuated some of its staff from Ethiopia

  • The ongoing crisis in the country is negative for Safaricom – we retain our Hold recommendation

Ethiopia at war: Safaricom flees
Tellimer Research
9 November 2021
Published byTellimer Research

Good story turned sour

The telecoms opportunity in Ethiopia is huge, but the civil war has escalated, bringing with it heightened risk, damages, and killings. An unconfirmed press report said that Safaricom has evacuated some of its staff from Ethiopia. Other counties including the United States, Denmark and Italy have also advised their citizens to evacuate the country.

The Safaricom-led consortium won the only telecom license that has been issued in Ethiopia this year after it bid US$850mn, but we believed that it was not so lucrative without a mobile money license. A few months ago, the Ethiopian authority confirmed that the telco will be able to offer mobile money services in the country.

Beyond the US$850mn license fee, we are not sure of the size of the capital investment made by the telco so far, although the initial announcement highlighted that the plan was to spend US$8bn over the next ten years. Some of the risks and uncertainties we highlighted previously included the aggressive capital expenditure plan, political unrest in Ethiopia, competitive intensity, and the local purchasing power in Ethiopia.

Uncertainty abounds but we retain our Hold

At the moment, we do not have enough information to thoroughly access the impact on Safaricom’s financials. The company will be releasing its half-year report tomorrow (10 November 2021) and an investor call will follow as well. Our fair value estimate for Safaricom without the Ethiopian operation is KES37, which still translates to a hold rating.

Valuation Summary