Safaricom’s Ethiopian Venture fuels Market growth, But Faces Mounting Financial Strain, World Bank Report Reveals
ADDIS ABABA, ETHIOPIA – Safaricom’s entry into the Ethiopian telecommunications market has spurred significant economic growth and job creation, but the company continues to operate at a loss due to incomplete regulatory reforms and a challenging economic climate, according to a new report by the World Bank. The findings highlight a complex picture of successful market liberalization hampered by structural constraints.
The World Bank estimates that telecom liberalization, largely driven by Safaricom’s arrival, has added approximately US$3.1 billion (KSh 400.6 billion) to ethiopia’s GDP – representing 0.7% of Gross National Income per capita – and supported around 900,000 jobs. The expansion has demonstrably “transformed Ethiopia‘s digital landscape,” introducing mobile money via M-Pesa, boosting connectivity, and raising standards for corporate governance and openness. It has also fostered innovation in fintech,digital trade,and mobile public services.
however, the report details significant financial difficulties for Safaricom in Ethiopia. Current revenue levels are insufficient to cover annual license amortization costs of US$66.7 million (KSh 8.6 billion) or ongoing network operations and maintenance. The company also incurs costs of over US$3 million (KSh 388 million) annually for fibre leasing from its primary competitor, ethio telecom, due to the delayed licensing of autonomous Tower Companies and Infrastructure Companies (InfraCos).
This reliance on Ethio telecom for wholesale network access,while competing on retail prices,”severely limits profitability,” the report states. Further exacerbating the situation is the sharp depreciation of the Ethiopian birr, which fell from 55 to 138 per U.S. dollar between 2024 and 2025. This currency devaluation slashed dollar-equivalent revenues and reduced the average revenue per user (ARPU) from US$1.66 (KSh 214.6) to US$1.19 (KSh 153.8). Effective data prices also dropped from 38 cents (KSh 49.1) to 21 cents (KSh 27.1) per gigabyte.
In contrast, Ethio Telecom maintains lower tariffs - around 16 cents (KSh 20.7) per gigabyte – by cross-subsidizing data services with profits from voice calls, a strategy unavailable to Safaricom.
The world Bank warns that Safaricom’s Ethiopian business remains “structurally constrained” by the absence of licensed TowerCos, InfraCos, and Mobile Virtual Network Operators (MVNOs), as well as a lack of a cost-based interconnection framework. This creates an uneven playing field that advantages the state-owned Ethio Telecom.
The report concludes that without “urgent regulatory equalisation and reforms to allow infrastructure sharing and fair pricing,” Safaricom’s Ethiopian venture could remain loss-making indefinitely. Despite the early financial challenges, the bank emphasizes that Safaricom remains “a critical driver of market reform,” offering valuable lessons for investors and regulators on balancing liberalization with long-term sustainability. The experience,the report cautions,could serve as a “cautionary tale” demonstrating that liberalization requires “structural support” to avoid leaving investors with sustained losses.
