Safaricom’s Entry into Ethiopia is High Risk, High Return – Citi

Analysts at Citi see Safaricom’s entry into Ethiopia as a high risk, high return investment. Bloomberg cites that the initial cost for network and licensing in Ethiopia is high. Nevertheless, Ethiopia’s population of more than 100 million people, as well as its growing economy, shows great potential for revenue growth. SBG Securities expects Safaricom will receive a license in Ethiopia, potentially increasing its long term earnings.

Analyst Dilya Ibragimova upgraded the Telco’s share to buy, at a price target of Ksh 35. Ibragimova says that M-Pesa’s growth from the new license may warrant the company’s further expansion.

News of Safaricom’s entry into Ethiopia upped its share prices, hitting a record high of KSh 33.50 on January 9th. Furthermore, the company’s digitization and business process engineering promise higher service revenues. Similarly, stockbrokers expect higher service revenues from a growing average revenue per user in M-Pesa. This, combined with growing mobile and fixed data revenues, will expand the company’s service revenues at a three-year CAGR of 7%.

Additionally, Ethiopia’s push to privatize its economy, as well as its rapid economic growth offers an inviting business environment.

Combined, a Safaricom’s prowess in digitization and mobile money and Ethiopia’s inviting business environment, show great promise for investors in Safaricom shares.