Safaricom has so far made significant strides towards entering Ethiopia's telecommunications market.
The giant telecommunications company has signed an agreement with its business partners to borrow up to $500 million (Sh55.7 billion) from America’s sovereign wealth fund US International Development Finance Corporation to finance its entry into Ethiopia.
Safaricom and its parent companies, Vodafone and Vodacom are bidding for one of two telecommunications licences being auctioned in that country.
The entities pursuing the initiative through the Global Partnership for Ethiopia, their joint investment venture.
Notably, the total investment for the expected entry is projected to exceed $1 billion (Ksh111 billion)
Through the above, Safaricom and its parent companies are bidding for one of two telecommunications licences being auctioned in Ethiopia, leaving the IDFC loan as just an initial figure.
IDFC stated, “An up to $500 million (Sh55.7 billion) loan to the Vodafone-led Global Partnership for Ethiopia that will finance the design, development, and operation of a new private mobile network provider and the acquisition of a mobile network provider licence."
The statement read further, "The project is expected to have a highly developmental impact through the creation of a new private telecommunications network that will increase connectivity in Ethiopia while utilising trusted technology.”
Safaricom had earlier stated that it would acquire more loans to reflect its standing as the majority shareholder with 51% stake in the venture.
According to IDFC, the period of its loan maturation is between five and 25 years, with repayment schedules set on quarterly or semi-annual basis.
It is also common to have a grace period on principal repayment at the beginning of the loan term.
The large size and international nature of the Ethiopia investment means that the Safaricom consortium will likely rely on funding from deep-pocketed foreign investors such as DFC if the entry is successful.
Mostly, Safaricom has mostly taken short-term debt in Kenyan shillings since its borrowings have been limited to local banks so far.
The telco giant has seen significant growth opportunities in Ethiopia, given that the market consists of over 100 million people with relatively lower uptake of mobile and broadband services.
The Ethiopian Communications Authority announced that by June 22 it had received expressions of interest from telcos and non-telecom operators.
Apart from the Safaricom consortium, other interested firms include Etisalat, Axian, MTN, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile, Kandu Global Communications and Electromecha International Projects.
Safaricom was allowed to lead the consortium for several reasons, including Kenya’s geographical proximity to Ethiopia.
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