Safaricom Telecommunications Ethiopia
On March 31, 2023, The Multilateral Investment Guarantee Agency (“MIGA”) a member of the World Bank Group, issued a US$ 1 billion Guarantee to Safaricom Plc (Kenya); Vodacom International Holdings Pty LTD (South Africa); Vodafone International Operations Limited (United Kingdom); British International Investment Plc (United Kingdom) to cover their equity investment in Safaricom Telecommunications Ethiopia (“Safaricom Ethiopia”), the first privately owned telecommunications network that was granted the second unified telecommunication service license following a competitive bid process in May 2021.
The License entitles Safaricom Ethiopia to provide fixed and mobile telecommunication services in Ethiopia or internationally by the use and operation of an international gateway. Safaricom Ethiopia started to roll out launch and operate its 2G, 3G, 4G networks across the country with 5G in selected areas (the “Project”). The commercial operation started on October 6, 2022. The Project cost to roll out the network in the coming 10 years is estimated at US$ 8 billion and is expected to be financed through a combination of equity and financial debt.
MIGA Guarantee covers the equity investments for 10 years, providing against the risks of War and Civil Disturbance, and Expropriation. The Project is aligned with MIGA’s strategic priorities of supporting investments into fragile and conflict-affected countries and countries eligible for concessional lending from the International Development Association (“IDA”).
The Project will benefit from IDA Private Sector Window support through a shared first-loss layer with an amount of US$ 95 million.
This is a joint project with International Finance Corporation (IFC); in accordance with MIGA AIP, the MIGA disclosure is linked to IFC disclosure. Click here to view the Environmental and Social Review Summary prepared by the IFC for their proposed support to the project.
The development impact of this project is expected to be very significant through increased access mobile penetration in the country, stemming from better technology deployment, access to high quality mobile services, and affordable pricing. Ethiopia has one of the lowest penetration rates in the world, with only 58% of Ethiopians with a mobile phone, and 16% with mobile broadband access. Increased accessibility will bolster economic activities. By increasing access to digital services, the project is expected to increase GDP per capita by up to 7 percent by 2028, helping to create more than two million direct and indirect jobs and contributing to the country’s sustainable future growth and to increase both financial and social inclusion for Ethiopians. Through clear and significant demonstration effects, the MIGA guarantee has the potential to stimulate more foreign direct investment to not only the telecoms sector but other sectors of the economy.
The project follows more than four years of World Bank Group engagements in Ethiopia aimed at opening the telecommunications sector to private sector investment and supporting market liberalization. Safaricom Ethiopia represents the first private sector mobile license issued as part of this liberalization process.