Safaricom Ethiopia Says Network Sharing Issue with Ethio Telecom

Safaricom Ethiopia has announced the resolution of a critical network-sharing dispute with state-owned Ethio Telecom, marking a partial victory in the operator's struggle to establish competitive infrastructure in Africa's second-most populous nation. However, the settlement leaves a significant unresolved issue: mobile money services powered by M-Pesa remain suspended, dealing a fresh blow to the Kenyan telecom giant's expansion strategy in the $32 billion Ethiopian market.

## What triggered the network-sharing crisis?

When Safaricom launched commercial operations in Ethiopia in 2022, it became the first private mobile operator to challenge Ethio Telecom's 27-year monopoly. Rather than building parallel infrastructure—a capital-intensive approach costing $500 million–$800 million—Safaricom negotiated wholesale network access from the incumbent, a model common in emerging markets. By late 2024, tensions escalated over pricing, quality standards, and technical specifications, forcing both parties into arbitration. Ethio Telecom's reluctance to grant favorable wholesale terms reflected its defensive posture: Safaricom had already captured approximately 18% of Ethiopia's 55 million mobile subscribers within two years.

## Why does the network resolution matter less than expected?

The technical infrastructure fix is strategically hollow without mobile money restoration. M-Pesa—Safaricom's flagship fintech service, generating 40% of group profit in Kenya—was the primary growth driver in Ethiopia's underbanked economy where only 35% of adults hold formal bank accounts. Mobile money enables Safaricom to build customer lifetime value beyond voice and data revenues, while also capturing remittances (estimated at $2 billion annually from the diaspora). By suspending M-Pesa, the National Bank of Ethiopia (NBE) and Ethio Telecom have effectively neutered Safaricom's competitive advantage, leaving the operator to compete on commoditized voice services where the incumbent controls regulatory levers.

The M-Pesa suspension ostensibly relates to "regulatory compliance" and "licensing framework alignment"—language that masks protectionist intent. Ethiopia's central bank has been cautious on digital financial services, historically favoring state-controlled models. Safaricom's application for a dedicated fintech license reportedly languished for 18 months before suspension, suggesting deliberate obstruction rather than technical gaps.

## What are the medium-term investor implications?

For Safaricom (SCOM on NSE: $4.82 as of January 2025), the Ethiopia operation now faces compressed profitability. Consensus forecasts for FY2025 assumed M-Pesa contribution of $80–120 million EBITDA; suspension could reduce this to $30–50 million. The broader concern is precedent: if Ethiopia's government can weaponize regulatory tools against foreign operators, Safaricom's regional expansion playbook—currently deployed across East Africa—faces existential risk in markets with political willingness to protect incumbents.

Conversely, this creates a consolidation opening. Airtel and Vodacom have both signaled interest in African markets; Ethiopia's competitive vacuum under partial deregulation may attract a second challenger operator by 2026, potentially pressuring Ethio Telecom into genuine infrastructure competition.

The network-sharing resolution is tactical relief masking strategic setback. Until M-Pesa restores, Safaricom's Ethiopia thesis remains incomplete.

---