Safaricom shares may have factored in the potential of its Ethiopian license win while disregarding the risks, analysts say.May 28th 2021 · 1 min read
Shares in Safaricom surged to a record this week after the Ethiopian telecommunications license win for the consortium it leads. Analysts question whether the market is underestimating the risks involved.
The consortium which won the license with a bid of $850mn includes Safaricom, its parent firms Vodafone and Vodacom, Britain’s CDC Group and Japan’s Sumitomo Corporation. Safaricom CEO Peter Ndegwa reacted by saying the company aims to become a competitor in the Ethiopian market, rather than a stakeholder in state-owned Ethio Telecom.
The political risks of setting up operations in Ethiopia are not reduced by a license award. The fact that Ethio is the sole telecoms provider has made it easy for the government to shut down the internet when politically convenient, such as after the murder of musician Hachalu Hundessa last year. The country remains racked by armed conflicts in the Tigray and Oromia regions.