Just three days after winning the Ethiopia mobile license, the Safaricom-led consortium has revealed a complicated ownership structure that will leave your head dizzy. According to a document released on 25th May 2021, Safaricom, Kenya’s leading mobile operator, will own majority (55.7%) shares in the arrangement ahead of a number of companies that partnered to bid for Ethiopia’s telecoms license, effectively giving the firm control of the consortium.
The consortium on 22nd May won the licence to enter the new market at a cost of $850 million (Ksh85 billion), beat a rival bid from a group led by South Africa’s MTN Group which had offered $600 million (Ksh60 billion).
The ownership structure appears crafted first to take advantage of favourable international tax conditions and give the operation a global feel – running from Kenya, South Africa to UK and Japan.
Japan’s conglomerate Sumitomo Corporation is the second-largest investor with 27.2% stake, followed by UK’s sovereign investment fund CDC Group at 10.9% and South Africa’s Vodacom Group 6.2%.
Vodafamily Ethiopia Holding Company Limited, incorporated in England as a Special Purpose Vehicle Company, will own Netherlands-registered Global Partnership for Ethiopia B.V. (GPE). This SPV will be owned 90% by Safaricom and 10% by Vodacom. The company will then move to Kenya as SafaricomFamily Ethiopia Holding Company Ltd.
GPE will in turn own a new operating company in Ethiopia whose licence will run for 15 years, with the right to apply for an additional 15 years. “As Safaricom will directly or indirectly hold more than 50 per cent equity stake in each of the consortium companies, each such consortium company will become a subsidiary company of Safaricom,” Safaricom said in the notice.
The consortium will proceed to form Opco in Ethiopia which will be issued with the Ethiopia teleco license to start operations next year.
Safaricom shareholders are expected to ratify this at its AGM scheduled for 30th July 2021. The consortium, through the operating company, intends to commence commercial operations in 2022.
The use of multiple investment vehicles will give the venture flexibility in terms of more favourable taxation and debt financing.
Ethiopia with an estimated population of 112 million people and reported economic growth of 8.3% in 2019 (World Bank data) represents an attractive market for Safaricom to expand into given that Safaricom operates in a neighbouring country. It sees the opportunity to deploy similar solutions to help overcome economic challenges that both countries have in common in sectors such as education, health and agriculture sectors.