In October 2022, Safaricom launched its telecommunications services in Ethiopia, marking the entry of the first private telecom operator in Africa’s second-most populous country. This move, following a $850 million (R15 billion) licensing fee paid in July 2021, signalled a shift away from the long-standing monopoly of state-owned Ethio Telecom.
In a recent African Tech Roundup podcast conversation I had with Yahya Banafa, the head of network planning and engineering at Safaricom Ethiopia, Banafa shed light on the complexities of establishing a new mobile telco network from scratch. Banafa's insights reveal a landscape fraught with both opportunities and obstacles.
$8bn ambition meets Ethiopian reality
The company's commitment to invest approximately $8bnn over the next decade underscores the scale of the undertaking. However, the rollout has not been without its hurdles. Initial plans faced delays due to socio-economic and national security issues within Ethiopia, leading to a phased approach beginning in Dire Dawa and targeting 25 cities by April 2023.
Banafa underscored several challenges specific to the Ethiopian market. The country’s diverse terrain and high-altitude regions have demanded creative solutions for network planning and tower placement. Additionally, navigating local business cultures and building partnerships – including with competitors – has been intricate, particularly with an incumbent banking sector decidedly frothy about the prospect of M-Pesa gaining unbridled dominance in the mobile money space.
New player, new game?
Interestingly, Safaricom Ethiopia has found itself in a position to potentially shape regulatory frameworks, given its status as a new entrant in a previously monopolised market. This situation presents both opportunities and responsibilities as the company navigates the evolving regulatory landscape.
Perhaps surprisingly, Banafa noted a higher-than-expected demand for data services, particularly among Ethiopia's youth. With approximately three million Ethiopians turning 18 each year, he says the appetite for data-intensive applications like TikTok and YouTube has pushed Safaricom to accelerate its 5G rollout plans.
The company's decision to deploy a unified, cloud-based core network may provide flexibility in meeting this demand. However, it remains to be seen how this infrastructure will perform in the long term and how it will compare to the legacy systems of established operators in other African markets.
Mobile telcos vs satellite internet
The potential entry of competitors like Starlink into the Ethiopian market presents another layer of complexity. Banafa's comments suggest an openness to potential partnerships, but the practical implications of such collaborations are yet to be determined.
Parallels have been drawn between Safaricom Ethiopia's current position and the company's experience with M-Pesa in Kenya. While mobile money services face initial resistance from Ethiopia's banking sector, it's worth noting that similar challenges were overcome in Kenya. However, the unique economic and regulatory environment of Ethiopia may prove especially challenging to crack.
The road ahead
As Safaricom Ethiopia continues its network rollout, several questions linger:
1. How will the company balance regulatory compliance with its business objectives?
2. Can the accelerated 5G plans meet the surging data demand, particularly in urban areas?
3. What impact will potential partnerships with satellite internet providers have on Safaricom's market position?
4. What impact will M-Pesa’s significant growth trajectory have on Ethiopia’s financial services landscape?
The progress of Safaricom's venture in Ethiopia warrants close observation. Its success or failure could have implications not only for Ethiopia's digital future but also for telecom liberalisation efforts across Africa.
As the enterprise unfolds, it will provide valuable insights into the challenges and opportunities of entering newly opened telecom markets on the continent.
Andile Masuku is the co-founder and executive producer at African Tech Roundup. Connect and engage with Andile on X (@MasukuAndile) and via LinkedIn.
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