Safaricom sees price reduction in Ethiopia license offer without M-Pesa


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Safaricom sees price reduction in Ethiopia license offer without M-Pesa


Safaricom CEO Peter Ndegwa. PHOTO FILE | NMG

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Summary

  • The phone company has revealed that its interest would not have been significantly increased and resulted in a higher bid price if the Ethiopian government had allowed it to operate its M-Pesa mobile money platform there.
  • Disclosures in a transcript call covering events up to the end of July reveal that Safaricom sees a license without mobile money hurt profitability and lengthen the payback period of the investment.

Safaricom #ticker: SCOM expects a reduced offer price for the license from the Ethiopian market following the announcement that only locally owned non-financial institutions will be allowed to offer mobile money services.

The telephone company revealed that its interest in the market of 108 million people and around 50 million telephone subscribers would only have been greatly enhanced and would have resulted in a higher bid price if the government Ethiopian had allowed him to operate his M-Pesa mobile money platform there.

Disclosures in a transcript call covering events up to the end of July reveal that Safaricom sees a license without mobile money hurt profitability and lengthen the payback period of the investment.

“A license that does not include a mobile money license will drastically reduce the level of profitability and therefore, in essence, our bid price for the license, but also our profitability and payback period,” said the director. General Peter Ndegwa in the call transcript.

Safaricom has never disclosed how much it is willing to bid or the expected annual growth rate that investment in the Ethiopian market is expected to generate, calling it competitive and sensitive information.

Vodafone Business Chief Financial Officer (CFO) Sateesh Kamath, then CFO of Safaricom, said only a license with mobile money would increase the price of the offering.

“Our interests would be greatly enhanced if there was mobile money and what we would be willing to pay as a license fee would certainly be different if there was mobile money and less if it wasn’t. there was no mobile money, ”Kamath said.

The Ethiopian Communications Authority (ECA) revealed that it had received 12 expressions of interest in late June for the issuance of two new full-service telecommunications licenses.

Safaricom applied for a license through a consortium that includes its parent companies Vodafone and Vodacom.

Other telecom operators vying for the two licenses include Liquid Telecom, Etisalat, Snail Mobile, Axian, MTN, Orange, Saudi Telecom Company and Telkom (South Africa).

Safaricom expects the result to be concluded by the end of the year or early next year if there is a delay.

The telephone company says factors such as currency depreciation are part of what determines the size of the bid to be made to ensure it puts “brain before heart” in the transaction.


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