Safaricom is betting on creating the highest quality network in Ethiopia to beat the competition in its new market. The company which recently won the bid for a telecommunications license in Ethiopia said it plans to use part of the $8.5 billion investment to establish the best quality network in the fast-developing nation.
Safaricom’s expansion into Ethiopia will partly be funded by the US sovereign wealth fund International Development Finance Corporation (IDFC) which signed a $500 million loan deal with the telecommunications company in December 2020. The rest of the funding will come from internal equity and other debt sources, the company said during a management call on Wednesday night.
The telecommunication giant revealed that it will maintain its dividend policy of distributing 80% of net profit to investors. Ethiopia is liberalizing its foreign exchange market to enable foreign companies like Safaricom to repatriate earnings to their home countries.
Citi research analysts have a neutral recommendation on Safaricom shares with a target price of KSh37.20 and an expected dividend yield of 3.4%. According to the analysts, the mobile company faces risks that could affect its share price such as, competition from smaller players, unfavorable financial regulation, increased pressure on voice revenue, entry of international money transfer platforms, M&A risk, and macro risk like inflation.