Are Safaricom shares good to buy amid Ethiopia bid?
Safaricom is seeking to enter the Ethiopian market. It has teamed up with a group including Vodacom and Vodafone to seek a licence to operate telecom business in Ethiopia. Will Safaricom shares benefit from the company entering Ethiopia?
Ethiopia is opening up its telecom market to foreign investors and it has two slots to dish out. A dozen companies, including Safaricom and its group, are vying for the two slots. That has created tight competition. A licence to operate telecom service in Ethiopia may cost as much as Ksh100 billion. Safaricom is already arranging for the financing, including through bank loans.
Safaricom will own 51% in the joint venture it is leading to invest in Ethiopia. Vodacom will own just 5% of the business and the rest of the investors in the group will share the remaining stake.
Is Ethiopia a good market for Safaricom?
Kenya’s telecom market has become mostly saturated, especially the voice calls segment. That has left Safaricom looking beyond the borders for growth and it believes Ethiopia presents a lucrative opportunity.
Ethiopia is home to more than 100 million people, yet only little over 40 million people use mobile phones. That leaves a vast market for new providers to tap and Safaricom is excited about the opportunity in Ethiopia.
Safaricom’s business strategy has been a big success in Kenya and it hopes to replicate that in Ethiopia. In addition to the voice calls, Safaricom also sees opportunity to grow its text and mobile internet businesses through Ethiopia venture. Moreover, Ethiopia could be a huge market for Mpesa because of its large unbanked population.
A chance to operate in Ethiopia would allow Safaricom to make more profit. That would in turn make its dividends more reliable. Moreover, profitable companies attract many investors, meaning success in Ethiopia would draw more investors to Safaricom shares.
How to buy Safaricom shares
Safaricom shares trade publicly on the Nairobi Securities Exchange, making them accessible to all interested investors. To be able to invest in Safaricom stock, you’ll first need to have a CDS account. You can open the account with a stockbroker or investment bank of your choice.
Once you set up the account, decide the number of Safaricom shares you want to purchase and place your order. Make sure to provide the broker or the bank with the money to buy the shares for you.