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Kenya’s Safaricom optimistic on Ethiopia as profits jump

(Adds details, background, outlook)

By George Obulutsa and Hereward Holland

NAIROBI, May 12 (Reuters) – Kenya’s biggest telecoms operator Safaricom is encouraged by the positive outlook in Ethiopia and plans to start operations there this year, its chief executive said on Thursday after reporting a 13.5% rise in group operating profit.

The company, which is partly owned by South Africa’s Vodacom and Britain’s Vodafone, secured a licence to operate in neighbouring Ethiopia a year ago, but is yet to launch operations there.

Safaricom said in November that the war that broke out in 2020 between the Ethiopian government and Tigray People’s Liberation Front could affect its initial target of breaking even within four years of the subsidiary’s launch.

“Ethiopia has experienced some unforeseen and unprecedented circumstances since our licence award,” Safaricom’s CEO Peter Ndegwa told an investor briefing on Thursday.

“We are encouraged though by the positive outlook to Ethiopia’s security and political situation, and the return to normal economic activity in most of the areas in the country,” he said.

The group will still launch commercial operations there this year, he added.

To supplement its network, which will launch with 1,000 base transmission stations, Safaricom will connect to and eventually share towers with state telecoms firm Ethio Telecom, he said.

“That is an important part of our ability to launch,” he said, adding that a deal on the tower network will be done by the end of this month.

The Ethiopian telecoms regulator signed off on the plan for the firms to share infrastructure last month.

Safaricom’s earnings before interest and taxes (EBIT) jumped to 109.1 billion Kenyan shillings ($940.52 million) in its year to the end of March, driven by its financial services business, it said.

In its home market, service revenues rose 12.3%, with revenue from mobile money platform M-Pesa surging by close to a third.

M-Pesa, launched as the world’s first ever mobile phone-based money transfer service 15 years ago, has over the years grown to largely outpace revenues from data and voice.

Safaricom cut its final dividend by almost a fifth to 0.75 shillings and guided for EBIT to reach 87 billion to 93 billion shillings in its year to the end of next March.

($1 = 116.0000 Kenyan shillings) (Reporting by George Obulutsa and Hereward Holland; Editing by Duncan Miriri and Jan Harvey)

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