South Africa’s Vodacom to partner with Safaricom in Ethiopia

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Shameel Joosub, CEO of Vodacom Group Limited, an African mobile communications company, is set to break into the Ethiopian market. The telecoms firm will do this in partnership with its Kenyan associate company, Safaricom.

Ethiopia, Africa’s fastest-growing and second-most populous country, said it will open its state-run telecoms monopoly to foreign investors.

Speaking to BusinessDay, Joosub revealed that entry into the East African country is the most attractive potential new market for Vodacom, especially after the telecoms firm reported a slowdown in revenue growth in South Africa, its home market.

Joosub said “but the opportunities are not that clear yet, there are indications that Ethiopia will issue additional licences, and potentially take in a strategic partner for the existing [government-owned] Ethio Telecom, but there’s nothing yet in terms of actual processes and so on”.

To diversify its earnings which rely heavily on the South African market, Vodacom has been eyeing the Ethiopian market for years. It opened an office in Ethiopia in 2013 and secured a value-added service licence to provide all services other than standard voice calls.

The East African country has a population of 105 million people and is Africa’s most populous country after Nigeria. Ethiopia also has one of the most closed and controlled economies on the continent. The International Monetary Fund expects the country to have the fastest-growing economy in Sub-Saharan Africa in 2018, with growth at 8.5 percent.

The South African economy has been in recession, meaning growth has been slow for network operators. Vodacom’s total revenues in South Africa rose 4.3 percent to 35.3 billion rand in the six months to September, down from 7.7 percent recorded a year before. Data revenue growth halved to 7.5 percent.

Mergence Investment Managers portfolio manager, Peter Takaendesa said the tepid growth in data revenues is probably behind the 7.69 percent decline to 120.30 rand in Vodacom’s share price on November 12, 2018. He noted that it is the biggest one-day drop since September 2017, and brings its decline for the year to 17.4 percent.

Joosub said the slow down in data revenue growth is most likely a temporary issue, and the rate “should accelerate back to double-digit growth over time”.

Vodacom provides voice, messaging and data services to over 55 million customers and has operations in Mozambique, Lesotho, the Democratic Republic of the Congo, Tanzania and Kenya.

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