Vodacom plans for Ethiopia
As SA market slows down, telecommunications company plots entry into fast-growing East African country
Mobile communications company Vodacom is eyeing an entry into Ethiopia, Africa’s fastestgrowing and second most populous country, in partnership with its Kenyan associate company, Safaricom, CEO Shameel Joosub says.
Mobile communications company Vodacom is eyeing an entry into Ethiopia, Africa’s fastest-growing and secondmost populous country, in partnership with its Kenyan associate company, Safaricom, CEO Shameel Joosub says.
The East African state, which said in June it will open its staterun telecoms monopoly to foreign investors, is “probably the most attractive” potential new market for Vodacom, Joosub told Business Day on Monday after the group reported a slowdown in revenue growth in SA.
“But the opportunities are not that clear yet there are indications that Ethiopia will issue additional licences and potentially take in a strategic partner for the existing [governmentowned] Ethio Telecom, but there’s nothing yet in terms of actual processes and so on,” Joosub said.
Vodacom has been eyeing the Ethiopian market for years to diversify its earnings, which rely heavily on the SA market. In 2013 it opened an office in that country and secured a valueadded service licence to provide all services other than standard voice calls.
With 105-million people, Ethiopia is Africa’s most populous country after Nigeria and has one of the most closed and controlled economies on the continent. The IMF expects the East African country to have the fastest-growing economy in sub-Saharan Africa in 2018, with growth at 8.5%.
The SA economy, meanwhile, has been in recession, meaning growth has been tough for network operators.
Vodacom’s total revenues in SA rose 4.3% to R35.3bn in the six months to September, down from 7.7% recorded a year before. Data revenue growth halved to 7.5%.
The tepid growth in data revenues is probably behind the 7.69% decline to R120.30 in Vodacom’s share price on Monday, said Mergence Investment Managers portfolio manager Peter Takaendesa. It is the biggest one-day drop since September 2017 and brings its decline for the year to 17.4%.
Joosub said the slowdown in data revenue growth is likely to be “a temporary dip” and the rate should return to double-digit growth “over time”.
“Overall, it’s still a strong set of results in SA. The subdued data growth, I think, was more a deliberate move on our part to reprice and also deal with the out-of-bundle issue,” Joosub said. Vodacom has operations in Mozambique, Lesotho, the Democratic Republic of the Congo, Tanzania and Kenya.
The Independent Communications Authority of SA (Icasa) recently published new rules governing the expiry of data bundles. When data prices are lowered — Joosub said the effective price of data fell 16.4% during the period — demand tends to pick up to compensate after about four months, he says.
Meanwhile, Joosub said he expects a competitive bidding process when regulators finally auction off 4G spectrum in SA.
Icasa plans to auction batches of radio frequencies for 4G services by April 2019, and simultaneously establish a wholesale open-access network (Woan).
“The competition between the existing partners will depend on where you set the reserve price and on the attractiveness of the SA market for international players — whether they are willing to come in and invest,” Joosub said.
However, operators will also be able to access spectrum via the Woan.
Joosub said there are inconsistencies between the directive given to Icasa regarding the auction and the new Electronic Communications Amendment Bill. “If you’re going to pay for the spectrum, there needs to be certain rights attached to it, but that’s not necessarily the case if you don’t pay for it in the Woan.”