How will Ethiopia’s new licence winner structure its operations?

How will Ethiopia’s new license winner structure its operations?

In case you were wondering how the consortium that on 22 May won a licence to enter the Ethiopian market actually works, Kenyan operator Safaricom has disclosed the ownership structure behind the bid.

A special purpose vehicle (SPV) called Vodafamily Ethiopia Holding Company has been set up. It is incorporated in the UK but is expected to move to Kenya at some stage, possibly, Telecompaper reports, under the name Safaricomfamily Ethiopia Holding Company.

Safaricom owns a 90 percent stake and Vodacom International has 10 percent of the SPV. A single share is held by Vodafone International Operations.

The SPV will hold a 61.9 percent stake in the Global Partnership for Ethiopia (GPE), an entity that calls the Netherlands home. The other shareholders in GPE include Japan’s Sumitomo Corporation and the UK’s CDC Group. Both shareholders were also involved in the licence-winning bid. 

GPE will in turn own a new operating company in Ethiopia – whose name is unknown at the moment – whose licence will run for 15 years. It will have the right to apply for an additional 15 years. Safaricom is expected to hold 55.7 percent in the operating company. Other shareholders in the Ethiopian operating unit will be Sumitomo with 27.2 percent, CDC with 10.9 percent and Vodacom with 6.2 percent.

The East African online news service suggests that the use of multiple investment vehicles will give the venture flexibility in terms of more favourable taxation and debt financing.

The licence to enter the new market cost $850 million. Commercial operations are expected to begin in 2022.

Safaricom has added, according to other news reports, that it is no longer interested in a stake in Ethiopia's state-owned Ethio Telecom, which is currently in the final stages of partial privatisation.