telecom investment

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.