Safaricom has raised its controlling stake in Global Partnership for Ethiopia, the consortium that has made a bid for one of two telecoms licences in Kenya’s northern neighbour, to 56 percent from the 51 percent announced previously.
Details of the consortium’s latest ownership structure was disclosed Tuesday by South Africa-based Vodacom Group which owns a 34.9 percent stake in the Nairobi Securities Exchange-listed firm.
“The consortium is 56 percent owned by Safaricom, six percent by Vodacom, 25 percent by Sumitomo the Japanese conglomerate and 10 percent by CDC, the UK sovereign investment fund,” Vodacom’s chief executive Shameel Joosub said at an investor briefing yesterday.
He did not explain the circumstances that led to the changes in the ownership. The multinational’s stake has also gone up, having previously stood at five percent.
The percentages listed by Mr Joosub exclude decimal places which would bring the stakes to 100 percent. Vodacom’s precise ownership in the consortium, for instance, is 6.2 percent according to regulatory filings.
Safaricom was allowed to lead the consortium for several reasons, including Kenya’s geographical proximity to Ethiopia.
Vodacom earlier said that it could raise its ownership in the consortium after a couple of years into the operation.
The Ethiopian Communications Authority (ECA) confirmed that the Safaricom group and another consortium led by South Africa’s MTN Group were the only parties to make bids in the auction for two operating licences.
“We now, of course, wait for the final outcome from the Ethiopian communications authorities which should be any day now … we are quite hopeful given that we have put our best foot forward as a consortium,” Mr Joosub said.
Ethiopian authorities have indicated that successful bidders will be announced by May 26. Safaricom Plc’s chances of winning one of the licences got a boost after nine other firms that had expressed interest in the auction dropped out at the last stage.
Reports indicate that they were spooked by alleged lack of transparency in the process and requirements that winners build their own network infrastructure such as towers.
They also felt that they were not ready to pay the amounts expected by the Ethiopian government, with officials anticipating to raise billions of dollars from the sale of the licences in what they have described as “the deal of the century.”
The firms that dropped out of the race are Etisalat, Axian, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile, Kandu Global Communications and Electromecha International Projects.
The fact that only two bids were made has narrowed the agency’s options and the bidding process could be reopened, especially if the financial offers fall below the government’s targets.
The amounts that Safaricom and MTN put in their bids is expected to be disclosed when Ethiopia announces the results of the auction.
Besides selling the new licences, the Ethiopian government is also disposing of a minority stake in Ethio Telecom, which has a monopoly in that market. Safaricom and its partners have signed an agreement to borrow up to US$500M (Sh53.7 billion) from America’s sovereign wealth fund US International Development Finance Corporation to fund their planned entry into Ethiopia.
The financial investment in Ethiopia is expected to top the US$1B (Sh107.5 billion) mark, with the DFC loan deal seen as part of the project’s fundraising efforts.
The loan is expected to help finance acquisition of the licence besides building of the mobile network infrastructure.
The DFC loan offers the consortium long-term financing on relatively favourable terms.
The international financier says its loans typically mature between five and 25 years, with repayment schedules set on quarterly or semi-annual basis.
A grace period on principal repayment at the beginning of the loan term is also common. The interest rate is a “negotiated spread over the base-cost of funds.” Long-term US government bonds currently have interest rates of below three percent, setting a low base on which to price the DFC loan.
Safaricom sees Ethiopia, a market with 117 million people and relatively lower uptake of mobile and broadband services, as presenting significant growth opportunities.