Safaricom eyes 7m subscribers in Ethiopia after growing base to 10m

There was excitement at Safaricom earlier in July when the data showed that there had been 10 million customers active on the Safaricom Ethiopia network over the last 90 days.

Having a huge active customer base for 90 days on your network means that they have become long-term customers, more than tourists who get a local SIM card to use for a short while or the customer who picks up a line because of an offer.

Safaricom Ethiopia’s 10 million customers are also a significant number, given that in Kenya, it took eight years to reach such a number.

This means that Ethiopians are adopting the service fast. With 3,141 base transmission stations now live, the focus is now switching to recruiting more customers, meaning the expensive work of putting up masts will slow down, and more will be done to recruit customers.

“Once you build the network, you start recruiting customers, to put more customers on to your network,” said Safaricom chief executive Peter Ndegwa. “We already have a scale network. We just need to accelerate the recruitment of customers.”

“A lot of what you will see in Ethiopia over the next two years is commercial acceleration rather than technology footprint expansion,” said Ndegwa. 

As a new network without as many customers as the existing network, Ethiotel, Safaricom Ethiopia first worked best as a network with very good mobile data. The good data has been enabled by the fact that all its infrastructure is new, providing strong 4G network. 

“When you have a small network, most people will use data. When you have a large network, then now people can start calling each other because you have enough customers that have your lines,” said Ndegwa.

More on-net usage, where customers are calling and texting each other within one network, is more profitable for the network providers because it means they do not have to pay Mobile Termination Rates to the other network provider, Ethiotel.

Safaricom Ethiopia now has the challenge to recruit seven million new customers in the company’s current financial year. 17 million is just half of the numbers in Kenya, and the point at which the business starts to achieve scale because of the on-net effect.

“When people know enough subscribers who have Safaricom lines, they can now call each other, and that’s when your network starts to accelerate,” said Ndegwa.

On the infrastructure side, he said, the peak investment has been reached.

Safaricom and the other members of the consortium behind Safaricom Ethiopia have now invested about $1.2 billion (Sh156 billion) in putting up the sites that now cover more than 150 towns and cities.

While the target to recruit seven million more customers in the current financial year might sound ambitious, Safaricom is confident that with 31,000 new customers joining the network daily, it is achievable.

“We are investing in the sales force agents, recruiting people who can be dealers,” said Ndegwa. It means more is spent on operating expenses rather than capital expenditure.

Ethiopians have also shown a healthy appetite for data, with 7.1 million customers active on mobile data of 17 million customers, with per-user consumption rising to 6.5 GB (gigabyte) per month, up 53 per cent compared to the previous year. 

This is significantly higher than in Kenya, where the average usage per customer is about 4GB.

The second area of investment is in M-Pesa, where the company aims to expand its use cases beyond sending money from one person to another.

The M-Pesa users in Ethiopia can now pay for electricity and fuel using the platform, a feature that the company initially expected to activate more quickly.

With M-Pesa, the idea is to grow use cases like it did in Kenya, where the ability to save (with M-Shwari) and later to get overdrafts (with Fuliza) happened, but at a faster pace since the basics exist and would only need to be rolled out after securing the partners and the regulator’s approval.

“We are not going the same path that we did in Kenya. We’ll leapfrog some of the processes we saw in Kenya based on the specific needs of Ethiopia,” said Safaricom chief executive.

The upshot of it all, said Ndegwa, is that Ethiopia will now begin to contribute more to the company’s top line with reduced losses on the bottom line.

The target for the current financial year is to grow Earnings Before Interest and Tax (EBIT) by 50 per cent at a group level. EBIT was Sh104.1 billion in the last financial year.

“Kenya grows in the normal way, Ethiopia declining in startup losses and lower foreign exchange losses means that you have that huge uplift in terms of Earnings Before Interest and Tax, and hopefully that translates into net income and that usually translates into dividends,” said Ndegwa.