Ethio Telecom to sell 10% to retail investors, then float

The change of tack comes as a result of a lack of sustained interest in the incumbent operator from foreign investors, with major international telecoms groups having backed away from buying in.

The latest development in this long-running privatisation saga comes from Bloomberg, which spoke to Abdurehman Eid, chief executive of the government's Ethiopian Investment Holdings arm, this week.

Retail investors are showing a "huge appetite" for the 10% of shares that are up for grabs, Eid told the newswire. The government's priority is to push ahead with that sale as quickly as possible, he said. It will then look to float the company on the yet-to-be-launched Ethiopian Securities Exchange, and only once that is complete will it turn its attention back to foreign investors, he explained.

Ethiopia is in the process of setting up its domestic stock exchange and has been for some years. It is due to begin operations in October, Bloomberg said. That gives us some idea of timescales, but various local press reports suggest it could be later in the year or even into 2025.

Either way, it will be some months before Ethio Telecom is on the hunt for a foreign investor again. Although that can hardly be seen as a surprise, given how interest in the telco cooled off last year.

A number of major international telecoms operators were linked with the Ethio Telecom privatisation, Orange and e& among them. Orange in particular spoke out about its interest in the operator, but in November revealed that it was withdrawing from the sale process on the grounds that the conditions were not right. It did not elaborate further.

Clearly everyone else felt the same. As Eid explained to Bloomberg, all the would-be foreign bidders fell by the wayside and as such the state put the sale process on ice.

It is not wholly clear at this stage what the telco could do to rekindle interest in the company if and when it revisits the plan to sell off that 45% stake.

Ethio Telecom already looks like a decent prospect for investment. Its recently-published full-year financials for 2023 show growth in turnover and earnings on the previous year; revenue increased by 20% to 71.5 billion birr (US$1.2 billion), while EBITDA jumped by almost the same amount to ETB37.6 billion.

Clearly the telco's financial performance is not the issue. Ethiopia was viewed as one of the global telecoms market's last untapped opportunities when Safaricom won its operating licence there in 2021. It launched services in late 2022 and it and Ethio Telecom have both thrived in the past couple of years. Mobile financial services have also taken off, with Ethio Telecom's telebirr offer leading the charge.

It appears to be a land of plenty, but the broader operating environment is not easy, which could well be why foreign players have shied away. The launch of the new stock exchange should help firm up the investment climate though. By this time next year, we could be talking about foreign players entering Ethio Telecom again.