Safaricom gets Sh12bn IFC loan for Ethiopia network

The International Finance Corporation (IFC) will provide a Sh12.03billion loan to Safaricom and its partners in the Ethiopian venture to fund the subsidiary’s investment programme

The World Bank’s private sector lending said in a disclosure that the funds will support Safaricom Telecommunications Ethiopia private limited company (STE) which targets to build, own and operate a nationwide public telecommunication network in the country.

“IFC intends to provide a loan of up to USD 100 million to fund the operating company’s investment programme,”  IFC said.

“The project aims to support the transformation of a series of SDG verticals via the provision of advanced telecom services dedicated to such verticals, including education, agriculture, medical, manufacturing, and tourism. The Project aligns with the government’s plan to digitise the Ethiopian economy and shift from a state-oriented development model to more liberalised models, including within the telecommunication sector” the lender also stated.

The Sh12.03 billion loan was revealed just hours after the IFC on Thursday announced plans to purchase a Sh19.25billion stake in the Safaricom-Ethiopia subsidiary to boost its work capital.

The World Bank’s private sector lending said in a disclosure that the funds in form of equity will support STE in its countrywide mobile network roll-out and comply with the terms of its license.

“IFC will also be supporting a group of regional champions and leading global emerging market investors, including the Voda Family (Vodafone Group, Vodacom Group, and Safaricom plc), Sumitomo Corporation, and British International Investment (the “Consortium”), in delivering an enhanced digital economy for Ethiopia,” IFC said adding that a separate debt package is also being discussed.

The Nairobi Securities Exchange-listed company is the major shareholder of the subsidiary whose other owners are Vodacom Group, Sumitomo Corporation, and CDC Group. The partners paid $850 million (Sh102.25 billion) for the licence fee.

Safaricom Ethiopia’s phased launch commenced in August 2022 in the city of Dire Dawa and will spread to 24 other cities, including Addis Ababa in the months that follow.

The new operation has ambitions of achieving gross margins of 40 per cent in 10 years.

The target is backed by heavy investments that the subsidiary will make in hiring staff and building infrastructure to acquire customers in the country with a population of more than 100 million.

Safaricom in its latest annual report disclosed that together with its partners in the Ethiopian venture, it paid IFC a transaction fee of $4 million (Sh481.23 million) for services rendered concerning the entry into the new market.

The Telco says in its latest annual report that the global financier was hired by the consortium that won a licence to set up a second telecommunications firm in that market called Safaricom Ethiopia.

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