Addis Ababa, Ethiopia – A recent assessment by the World Bank reveals a complex picture of Safaricom Ethiopia’s impact on the nation’s telecommunications sector. While the Kenyan operator’s entry has undeniably spurred competition, dramatically lowered data costs, and expanded internet access for millions, the company continues to operate at a significant financial loss three years after launch. The findings underscore the challenges of market liberalization in emerging economies and the critical need for supportive regulatory frameworks.
The World Bank’s Ethiopia Telecom Market Assessment Report details a net loss of US$325 million (KSh 42 billion) for Safaricom Ethiopia in its 2024 fiscal year, despite generating revenue of US$53.6 million (KSh 6.9 billion). This substantial deficit comes after a US$1 billion investment for a license and a further US$2.2 billion (KSh 284 billion) in infrastructure development, including 4G network rollout across the country. The expansion marked the end of Ethio Telecom’s long-held monopoly and the beginning of Ethiopia’s journey towards a more open telecommunications market.
Safaricom Ethiopia: A Catalyst for Change, But at What Cost?
Launched in October 2022, Safaricom Ethiopia’s arrival has triggered a cascade of positive changes. Data prices have plummeted by nearly 70% since 2017, and the number of mobile broadband users has more than doubled to 87 million. By early 2025, Safaricom had amassed 5.2 million voice subscribers, 4.9 million data users, and an impressive 8.3 million M-Pesa customers, demonstrating rapid adoption of its mobile money services. This rapid growth highlights the latent demand for affordable and accessible digital services within Ethiopia.
Data revenue now constitutes 72% of Safaricom Ethiopia’s total income, and over 80% of its mobile service revenue, reflecting a clear shift in consumer behavior. Average monthly data consumption per user has reached 6.7 gigabytes, exceeding the national average in Kenya, Safaricom’s home market. Furthermore, 4G coverage has expanded to encompass nearly half of Ethiopia’s population (49%), a significant leap from just 6% in 2021. The affordability of data has also improved dramatically, with a 2GB data bundle now costing approximately 0.7% of Ethiopia’s Gross National Income per capita.
The World Bank estimates that the liberalization of Ethiopia’s telecom sector, largely driven by Safaricom’s entry, has contributed approximately US$3.1 billion (KSh 400.6 billion) to the nation’s GDP and supported around 900,000 jobs. However, these economic gains are juxtaposed against the company’s ongoing financial struggles. Current revenue streams are insufficient to cover the annual license amortization costs of US$66.7 million (KSh 8.6 billion) and the expenses associated with network operation and maintenance.
The Challenges of a Tilted Playing Field
A key impediment to Safaricom Ethiopia’s profitability is its reliance on Ethio Telecom for wholesale network access, specifically fiber leasing, at a cost exceeding US$3 million (KSh 388 million) annually. The delayed licensing of independent Tower Companies and Infrastructure Companies (InfraCos) forces Safaricom to compete at the retail level while being dependent on its primary competitor for essential infrastructure. This creates an uneven playing field that severely restricts its ability to achieve sustainable profitability. What impact will this have on future investment in the sector?
Adding to the financial strain, the depreciation of the Ethiopian birr has significantly eroded Safaricom’s revenue. The currency’s decline from 55 to 138 against the US dollar between 2024 and 2025 has reduced dollar-equivalent earnings and lowered the average revenue per user (ARPU). Monthly data ARPU fell from US$1.66 (KSh 214.6) to US$1.19 (KSh 153.8), while the effective price of data decreased from 38 cents (KSh 49.1) to 21 cents (KSh 27.1) per gigabyte.
Ethio Telecom, benefiting from cross-subsidization of data services with profits from voice calls, maintains lower tariffs – around 16 cents (KSh 20.7) per gigabyte – a competitive advantage Safaricom currently lacks. This highlights the need for a level playing field where all operators can compete fairly.
The World Bank’s report emphasizes that Safaricom Ethiopia’s challenges stem from incomplete regulatory reforms. The absence of licensed TowerCos, InfraCos, and Mobile Virtual Network Operators (MVNOs), coupled with the lack of a cost-based interconnection framework, perpetuates a system that favors the state-owned Ethio Telecom. Without swift regulatory adjustments to promote infrastructure sharing and fair pricing, Safaricom’s Ethiopian venture risks remaining perpetually unprofitable.
Despite these hurdles, the World Bank acknowledges Safaricom’s transformative impact on Ethiopia’s digital landscape. The company has improved connectivity, introduced mobile money through M-Pesa, and established new standards for corporate governance and transparency. It has also fostered innovation and opened opportunities in fintech, digital trade, and mobile-based public services. The World Bank continues to advocate for policies that support sustainable growth in the sector.
The report concludes that while Safaricom’s initial foray into Ethiopia has been costly, it remains a vital catalyst for market reform. The experience provides valuable lessons for both investors and regulators regarding the delicate balance between liberalization and sustainability. Safaricom’s commitment to the Ethiopian market remains strong, but its long-term success hinges on a more equitable regulatory environment.
Without accelerated reforms to foster fair competition and cost-effective operations, Safaricom’s pioneering venture could serve as a cautionary tale – a stark reminder that liberalization without adequate structural support can transform markets while simultaneously jeopardizing investor returns.
Frequently Asked Questions About Safaricom Ethiopia
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What is Safaricom Ethiopia’s current financial situation?
Safaricom Ethiopia reported a net loss of US$325 million (KSh 42 billion) in its 2024 fiscal year, despite revenue of US$53.6 million (KSh 6.9 billion). The company continues to face significant financial challenges.
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How has Safaricom Ethiopia impacted data prices in Ethiopia?
Safaricom Ethiopia’s entry into the market has led to a dramatic decrease in data prices, falling by nearly 70% since 2017, making internet access more affordable for millions of Ethiopians.
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What role does the World Bank play in assessing the Ethiopian telecom market?
The World Bank conducts regular assessments of the Ethiopian telecom market to provide insights into its development, identify challenges, and recommend policy reforms to promote competition and sustainability.
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What are the main obstacles to Safaricom Ethiopia’s profitability?
Key obstacles include reliance on Ethio Telecom for fiber leasing, the absence of licensed TowerCos and InfraCos, and the lack of a cost-based interconnection framework, creating an uneven playing field.
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How has Safaricom Ethiopia contributed to Ethiopia’s GDP?
The World Bank estimates that telecom liberalization, largely driven by Safaricom’s entry, has added approximately US$3.1 billion (KSh 400.6 billion) to Ethiopia’s GDP and supported around 900,000 jobs.
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What is M-Pesa’s role in Safaricom Ethiopia’s growth?
M-Pesa, Safaricom’s mobile money service, has been rapidly adopted in Ethiopia, with 8.3 million customers by early 2025, demonstrating the demand for accessible financial services.
The future of Safaricom Ethiopia, and indeed the broader Ethiopian telecom market, hinges on the government’s commitment to enacting comprehensive regulatory reforms. Will Ethiopia seize the opportunity to create a truly competitive and sustainable digital ecosystem? What further steps must be taken to ensure a level playing field for all operators?
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Disclaimer: This article provides general information and should not be considered financial or investment advice.
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