Safaricom Ltd, together with its parent companies, Vodafone Group Plc and Vodacom Group Limited have formed a joint venture in their bid to enter the Ethiopian Market. Dubbed Global Partnership for Ethiopia, the consortium is bidding for one of Ethiopia’s two telecommunications licenses up for grabs.
The three partners have now signed an agreement to borrow up to Sh500 million (55.7 billion) from the US International Development Finance Corporation (DFC)
The DFC loan deal is part of the trio’s efforts to fundraise for project should they be awarded the license. The companies expect the financial investment towards the Ethiopian market to cost about $1 billion (Sh111 billion)
” …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,” DFC said in a statement.
“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.”
Earlier, Safaricom said it was willing to take on more debt as the majority shareholder in the consortium with a stake of 51 percent. Vodacom has a 5 percent stake while the rest is shared out among various financial investors.
The DFC is offering the trio long-term financing with favourable terms attached to the loan.
The loans mature in between 5 and 25 years, with repayment schedules set to quarterly and semi-annual basis. DFC fees include an upfront retainer for due diligence, origination fees that is payable on the first disbursement, commitment fee which is an annual percentage on the undisbursed amount and maintenance fee which covers the amount used to monitor the loan.
Ethiopia invited foreign telecom companies as part of its homegrown economic reform agenda launched in 2019. The companies have been invited to buy a 40 per cent stake in Ethio Telecom, in efforts to end monopoly in the sector and liberalize the country’s economy.
Safaricom said they were ready to abide by the conditions set by the Ethiopian government. Ethiopia has a population of about 110 million people with 50 million mobile phone subscribers, making it a vast potential market for mobile services.
Ethiopia’s telecom sector transformation comprises of Ethio Telecom, the sole supplier of telecom services in the country and Ethiopian Communication Authority (ECA) which is in charge of licensing for the two companies that will be successful in entering in the country.
The other 11 firms that have expressed interest are: Etisalat, Axian, MTN, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile and the two non-telecom operators, Kandu Global Telecommunications and Electromecha International Projects.