Safaricom pays IFC Sh474m for Ethiopia entry transactions

 

The $100 million China-assembled Safaricom data centre in Addis Ababa, Ethiopia. PHOTO | TESFA-ALEM TEKLE | NMG

By Edna Mwenda More by this Author

Safaricom and its partners in the Ethiopian venture paid the International Finance Corporation (IFC) a transaction fee of $4 million (Sh474 million) for services rendered in relation to the entry into the new market.

The Telco says in its latest annual report that the global financier, which offers advisory services besides debt and equity investments, was hired by the consortium that won a licence to set up a second telecommunications firm in that market called Safaricom Ethiopia.

The Nairobi Securities Exchange-listed company is the major shareholder of the subsidiary whose other owners are Vodacom Group, Sumitomo Corporation and CDC Group. The partners paid $850 million (Sh100.8 billion) for the licence fee.

“In addition, a transaction fee of $4 million (Sh474 million) was paid to the International Finance Corporation. The total cost was distributed in a manner proportionate to each consortium partner’s shareholding in [the joint ventur],” Safaricom said.

The telco did not disclose the services received from IFC but they could be mobilisation of loans or advisory services on the bidding for the licence, which was issued last year.

The company relied heavily on short-term loans to fulfil its part of the capital obligations in the new venture.

Standard Chartered Bank Kenya was one of the major lenders that loaned Safaricom $400 million (Sh46.3 billion) last year, helping the telecom operator pay for its Ethiopian licence.

Safaricom Ethiopia is set to launch operations next month, starting with Dire Dawa — a city in eastern Ethiopia near the Oromia and Somali border.

“Our Ethiopian business, Safaricom Ethiopia, is making excellent progress on its commercial launch plans in Africa’s second-largest country by population,” Vodacom said in a trading update.

Phased launch

Safaricom Ethiopia’s phased launch will commence in August 2022 in the city of Dire Dawa and then accelerate to 24 other cities, including Addis Ababa in the months that follow.

The new operation has ambitions of achieving gross margins of 40 per cent in 10 years. The target is backed by heavy investments that the subsidiary will make in hiring staff and building infrastructure to acquire customers in the country with a population of more than 100 million.

emwenda@ke.nationmedia.com