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Safaricom bets on tariff hike for Ethiopia profits
Chief Finance Officer of Safaricom PLC Dilip Pal speaks during Safaricom’s 2023/2024 half year financial results announcement on November 9, 2023 at Michael Joseph Centre- Safaricom Head Quarters in Nairobi.
Safaricom Plc says a tariff hike would be crucial to help it break into profits in Ethiopia as its revenues in the country remain under pressure from currency depreciation.
The telcoms operator which ventured into the market in 2022 has however retained its target for profitability in Ethiopia in March 2027 as it marks a notable reduction in losses from Sh19.4 billion to Sh15.2 billion for the half year period closing in September 2025.
Safaricom is pushing for higher service charges in Ethiopia in the backdrop of a damning World Bank report that deemed telecoms investments in the country unsustainable as revenues remain depressed by low tariff rates.
The low tariff rates are exacerbated by the sharp depreciation in the local currency-the Ethiopian birr- which has left operators like Safaricom in an even deeper hole as it prices its investment and expected revenue/income targets in US dollars.
“We remain concerned about the market repair as one cannot sustain a business made from a dollar investment in the country,” said Safaricom’s chief finance officer Dilip Pal.
“The return that you are expecting with the depreciation of the birr from 57 units to the dollar in July 2024 to 146 birr means you need price correction. The price levels are way too low and telecoms like us are selling their services, be it data or voice, below cost and that must change.”
A report commissioned by the Ethiopian Communications Authority (ECA) and authored by the World Bank established that low industry tariffs have disincentivised investments in the telecoms industry as potential investors seek to avoid losses.
The ECA has made reforms to increase broadband access and reduce prices, including last year’s reduction in mobile termination rates (MTR), but challenges persist including the low revenue potential for investors and biased rules favouring EthioTel- the State-owned operator.
The World Bank says the country stands to lose out on advancements to its sector if telecoms fail to generate enough revenues to justify investments.
“Ethiopia’s average revenue per user (ARPU) remains one of the lowest in Africa at around $1 (Sh129.23) per month, reducing scope for fresh network investment,” the World Bank stated in its report.
“Compared to other African countries, Ethiopia still lags in 4G coverage, broadband speed and fixed internet penetration, particularly in rural and remote areas, though the gap has narrowed considerably since 2018. These gaps will not be bridged without fresh investment, and currently, neither operator is in a position to commit to this.”
Safaricom Ethiopia realised revenues of Sh6.18 billion from voice, messaging, data and M-Pesa in the six months to September 2025 with internet purchases making for the lion’s share of the topline at Sh4.1 billion.
Voice revenues stood at a lower Sh1.3 billion, messaging revenues were at Sh74.2 million while M-Pesa revenues were the lowest at Sh8.7 million, revealing the continued struggle by Safaricom to grow the use case of mobile-money services in the cash heavy economy.
The operator noted it was easier to drive data over voice based on the company’s current reach in infrastructure.
“The reduction in MTR has been one of our key ask. This allows us to expand the on-network and off-network base, and those customers can now make calls off the network. That’s how the community gets built and we have now begun to see the scale benefit,” said Mr Pal.
Safaricom’s Ethiopia expansion has shown promise from increased network usage with the number of 90-day active customers rising by 83.7 percent from last year to 11.15 million.
Active voice customers stand at 9.57 million, data customers are at 8.87 million while M-Pesa customers trail the pair with 3.35 million 90-day current customers.
Safaricom’s customers in Ethiopia outpace Kenyan customers in use patterns on data and are edging closer to top voice revealing the momentum of the business whose groundbreaking was in 2022.
Ethiopian users talk for an average of 145 minutes a month on Safaricom against 200 minutes for Kenyan customers, but the former tops in data use at 1.4 times with the average user buying internet packages worth 6.7 gigabytes per month.
