By-Brook Beyene
Ethio Telecom, Ethiopia’s dominant telecom provider, is in the process of partial privatization. The company is offering 100 million ordinary shares at ETB 300 per share, with the total offering amounting to ETB 30 billion. This marks an important milestone in the country’s economic reforms, as the state-owned enterprise opens up for public investment. If you’re considering purchasing shares, here’s a summary of the 227-page prospectus outlining the key details and risks.
- Company Overview and Offer Details
Ethio Telecom currently holds a dominant 94.5% market share in Ethiopia’s telecom sector, serving 78.3 million subscribers. Its operations span three core segments:
Telecom Services: Voice, data, and internet services.
Infrastructure Sharing: Managing and leasing telecommunications infrastructure.
Mobile Financial Services: Through its platform, Telebirr, a fast-growing mobile payment and financial services solution.
The company manages an extensive infrastructure network, with 8,538 towers, including 5G services in select cities. Telebirr has become a standout feature of Ethio Telecom’s portfolio, with 47.5 million users contributing to its growth.
- Key Financials
Ethio Telecom reported robust financial results for the year ending June 2024. Revenue reached ETB 91.37 billion, a notable increase from ETB 71.5 billion in 2023. Its EBITDA stands at ETB 41.2 billion, reflecting strong profitability. Telebirr alone generated ETB 2.3 billion in revenue, demonstrating its rapid rise in Ethiopia’s mobile financial sector.
- Investment Risks
While the prospects are promising, there are key risks investors should consider:
Market Competition: Safaricom’s entry into Ethiopia introduces a new competitor, which may challenge Ethio Telecom’s dominant position.
Political and Economic Instability: Being entirely dependent on the Ethiopian market, the company is exposed to potential disruptions caused by political unrest or economic challenges.
Foreign Currency Fluctuations: Ethio Telecom’s foreign contracts expose it to currency volatility, particularly as Ethiopia shifts toward a market-determined exchange rate.
Regulatory Risks: Ethio Telecom’s operations, especially in mobile financial services, are subject to regulatory frameworks that could impact its profitability if laws change.
- Corporate Governance
The company’s governance is structured around a Board of Directors and an experienced Executive Management team, led by CEO Frehiwot Tamiru. The Ethiopian Investment Holdings (EIH), a state entity, currently holds 100% of the company’s shares. After this offering, it will retain a 90% stake.
- The Privatization Process
Ethio Telecom’s privatization process aims to sell up to 45% of its shares in total. The current offer constitutes 10% of the issued shares, leaving room for future sales as part of the government’s broader economic liberalization efforts.
- Application Process for Shares
To purchase shares, applications are processed through the Telebirr Superapp, with a minimum investment requirement of ETB 9,900 (33 shares) and a maximum of ETB 999,900 (3,333 shares). Buyers have a 48-hour window to complete their applications, and all payments must be made using the Telebirr mobile payment system.
- Post-Offer Considerations
No Immediate Trading: Shareholders will not be able to trade shares immediately. Ethio Telecom plans to list on the Ethiopian Stock Exchange (ESX) within 12 months, but there is no certainty regarding the timeline.
Lock-In Period: Until the ESX listing is complete, the shares will remain locked, meaning shareholders will have limited liquidity during this period.
- Key Risks Specific to the Offer
Limited Liquidity: Since there is no established market for trading shares yet, liquidity could be low until the ESX listing.
Dividends: Investors face the risk that dividends may not meet expectations or may not be paid at all.
Minority Shareholder Influence: EIH’s continued 90% ownership means that minority shareholders will have limited control or influence over company decisions.
- Allotment and Refunds
If the offering is oversubscribed, an algorithm will ensure a fair distribution of shares. Unsuccessful applicants will receive refunds within 10 working days after the allotment process is completed.
The share offering represents a unique opportunity for Ethiopian investors to own part of one of the country’s most vital infrastructure companies. However, investors should carefully weigh the risks, including market competition, regulatory challenges, and the uncertainty surrounding the listing on the ESX. With Ethio Telecom’s solid financial performance and growing services, particularly in mobile payments, this offering could appeal to those looking to invest in the future of Ethiopia’s digital economy.
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