Close to a year after launch, Telebirr (Ethio Tel’s mobile money service) says it has obtained over 17.6mn subscribers, processed cUS$245.2mn in transaction value and US$528k in remittances – this is further evidence of the mobile money opportunity in Ethiopia. In contrast, Safaricom Ethiopia missed its proposed launch date of 9 April. We believe some of our previously highlighted concerns are holding the telco back. In this note, we assess the likely causes and implications of this delay.
The mobile money market to watch
Africa’s mobile money growth in 2022 is expected to come in large part from Nigeria and Ethiopia, where mobile money development is still nascent, financial inclusion is still low and the population is very large – with c115mn people, Ethiopia is the second-most populous country in Africa. This makes for perfect market conditions for telco-led mobile money to grow significantly.
Last year, the Ethiopian government opened its telecom sector to private institutions. The partly successful privatisation effort saw Kenya’s Safaricom win a licence to operate mobile services and mobile money in Ethiopia.
The mobile money license did not originally come with an operating license, and we were sceptical about the payoff of Safaricom’s investment in Ethiopia without an opportunity to provide mobile money services. However, this was later revised under the condition that it would be launched after a year, giving state-owned Ethio Tel’s Telebirr a head start in the mobile money race.
The head start
Telebirr reports to have reached over 17.6mn subscribers, processed cUS$245.2mn in transaction value and US$528k in remittances. A media report says that the mobile money operator has engaged more than 64,000 agents and over 16,000 merchants, and is in possible partnership with 12 commercial banks. Other companies including Ethiopian Airlines are also said to have integrated their services with Telebirr.
First mover advantage can be critical in mobile money, mostly because of the network effect. This does not mean that Safaricom cannot catch up, but the longer the telco waits to launch, the more challenging it becomes.
What's holding Safaricom back?
Safaricom was expected to launch officially on 9 April this year, but the telco giant has not said a word about launching. Many reasons could be responsible for this – we highlighted some of our concerns with Ethiopia previously.
One of our key concerns was the security situation in Ethiopia. The country is still facing a humanitarian crisis, and this caused Safaricom to evacuate some of its staff late last year. Nevertheless, the telco has continued setting up – recently unveiling its US$100mn data centre in Ethiopia and signing a 5-year infrastructure agreement with Ethio Tel.
We still think Safaricom can be successful in Ethiopia
We think Safaricom can still make a success of its entry into the Ethiopian market, despite this delay. Ethiopia has paused further privatisation plans (to sell a third license and sell a 40% stake in Ethio Tel) for now, meaning Safaricom only has to worry about Ethio Tel. Our view is that although Ethio Tel will always have the advantage of being an indigenous government-owned telco, Safaricom has the advantage of extensive experience and access to capital.
Ethiopia prepares to open its banking sector to foreign institutions (Mwangi, March 2022)
Ethiopia: The forgotten war rages on (Curran, April 2022)