UPDATED WITH DETAILS OF SHARE OFFER

The state-owned giant Ethio Telecom launched its offer of 10% of its shares to the Ethiopian public from 17 October and the offer will close on 3 January 2025. It is the first of a planned wave of privatization as part of revolutionary transformation to Ethiopia’s economy. The sale of 100m ordinary shares at ETB 300 each aims to raise ETB 30 billion ($250m at today’s rate of ETB120.18) which goes to the former 100% owner, the $45billion Ethiopian Investment Holdings.

Speaking at the launch on 16 October, Prime Minister Abiy Ahmed said: “This is an historic moment”, according to this Reuters report. A report on Bloomberg on 18 October hails this as largest African IPO this year and contains a link to an interview with Brook Taye of EIH.

Ethio Telecom Share offer details

The offer will be open until 3 January 2025. The shares are only available to Ethiopian citizens who are local residents and who can buy them using the telco’s telebirr mobile payment service. According to a statement from Ethio Telecom on 16 October, the minimum application will be for 33 shares costing ETB 9,900 ( $82.50) up to a maximum 3,333 shares costing ETB 999,900 ($8,325). The amount will be topped up with a service fee of 1.5% and value added tax at 15%.

Full details of the offer are available via the prospectus on the Ethio Telecom website, when this page is working or from the Telebirr app. The prospectus can also be downloaded from other websites, for example Daniel Fikadu’s useful Ethiopian Law website works well and you can find the prospectus here for the Ethio Telecom initial public offer (IPO) of shares. The prospectus contains much useful information about the company, including its business risks.

According to Ethio Telecom the process to apply is 1) be an Ethiopian citizen, 2) register and open an account on the registration application, 3) present a legal document that identifies your identity, (and have a legal power of attorney if you are submitting the purchase application for someone else), 4) be a telebirr SuperApp user, 5) read carefully the statements about the company and the risk analysis presented in the prospectus before applying, 6) carefully fill out the application for share purchase on the telebirr SuperApp and 7) complete the payment within 48 hours.

According to the statement: “The Ordinary Shares will be subject to a lock-in period, during which they cannot be traded, sold, transferred, or otherwise disposed of until the listing process of the company in the Ethiopian Securities Exchange (ESX) is completed. Additionally, the company cannot guarantee prospective investors who have made a successful application that they will be issued the allocation that they applied for or any allocation of the Offer Shares. The allocation of the Offer Shares will be at the discretion of the Company.”

The offer could close earlier, if the offer cap (200m shares) are subscribed. The allocation and verification is set to continue until 24 January and results should be announced by 31 January. The company intends to list on the proposed ESX “as soon as practicable after completion of the Offer, and within 12 months.”

After the shares are listed on the future ESX the price will be determined by buyers and sellers in the share market, trading through stockbrokers.

The transaction advisor is D and T Management Consulting PLC (Deloitte) and the Legal Advisor is Tamrat Assefa Liban Law Office. Ethio Telecom has been given a stockbroker licence so that it can sell shares to the public, according to this story on Addis Insight website. The prospectus says Ethio Telecom is acquiring a brokerage platform to be accessible through Telebirr and its website. We could not find details of licences issued or of licensed entities on the ECMA website.

Strong pipeline for Africa’s newest stock exchange

The initial public offer (IPO) comes ahead of the eagerly-awaited launch of the Ethiopian Securities Exchange, heralded for November. The exchange is overdue and Ethiopia is the only one of Africa’s big five economies that does not have a well run and regulated African securities exchange.

Ethio Telecom is reported to be the planned first equity listing, with a strong pipeline to follow. The ESX will trade money market instruments, equities and bonds when it launches .

Progress has reportedly been fast on the installation of the automated trading and broker back office stock exchange systems since the IT agreement was signed with provider InfoTech. In April the ESX announced it had raised $26.6m (ETB 1.51bn)  through a share offer with shareholders including the Nigerian Exchange (NGX), FSD Africa funded by the British Government, and Trade and Development Bank.

About Ethio Telecom SC

The telco has 79m customers of which 50m use telebirr, according to its latest statement. It reported revenue of ETB 91.4 bn ($761m) and profit after tax of ETB 19.0 bn ($158 million) for the financial year to 30 June (the 2016 Ethiopian fiscal year ended 7 July). The share offer is likely to be strongly subscribed. On 21 June 2024, it transformed its structure from being a state-owned enterprise to Ethio Telecom Share Company (SC) in terms of the Commercial Code (Ethiopia’s company law) which was registered on 1 July.

Brook Taye, Chief Executive Officer of Ethiopian Investment Holdings, says the first share offer is partly for learning.

Sovereign fund will drive future listings

EIH is the state-owned sovereign wealth fund that acts as government’s strategic investment arm and controls 27 portfolio companies. It values their total gross assets at $45bn and says total annual revenue is some $18.5bn. EIH is working with ten state-owned companies in preparation for more listings.

Brook Taye moved to head EIH after spear-heading capital market development as Director General of the Ethiopian Capital Markets Authority (ECMA). Read this article on Addis Fortune by Tizita Shewaferaw.

Hana Tehelku, the new DG at ECMA since August, said in October at AFSIC – Investing in Africa conference (AFSIC) in London that the regulator is working with the World Bank to create an IPO clinic to help state-owned enterprises and private businesses to prepare for listing. The pipeline could include Ethiopian Insurance Corporation and Ethiopian Shipping and Logistics Services.

Brook told reporters that the government will eventually sell another 45% of Ethio Telecom to foreign and local investors and will retain 45% of the shares.

Ethio Telecom is the largest operator, followed by Safaricom consortium. Karin Strohecker of Reuters reported that government will offer a second private sector telecom licence, quoting Brook: “We still think that this is a three-operator market, especially when you add the B2B (business to business) and B2C (business to consumer) sector, and broadband services to houses and offices. It’s a huge opportunity. So we’re still very much interested, and welcome any interest from operators.”

Financial sector deregulation bill

He added that a proclamation was in progress in Parliament to deregulate the financial sector and make it easier for foreign banks and others to set up: “We’re hoping that by the next two, three months, parliament would adopt or enact the new proclamation, and with that, we’re hoping to see a significant number of continental giants operating in Ethiopia as private banks.

“We’re seeing banks in our neighbourhood looking at Ethiopia, we’re seeing North African banks looking at Ethiopia, and some of household banks in West Africa also looking at Ethiopia. It’s a huge market and we can absorb several foreign banks coming in.”

Ethio Telecom celebrates 130 years

This website gives some history of telecommunications in Ethiopia and the reason why Ethio Telecom says it is 130 years old. Emperor Menelik II formally introduced telecommunications services in Ethiopia in 1894. This was after his cousin Ras Mekonnen returned in 1889 from visiting Italy, bringing brought telephone apparatus, and set up a company.

The news story on Bloomberg on 16 October highlights other parts of Ethiopia’s economic restructuring including a $3.4bn loan from the International Monetary Fund and the potential to raise more than $20bn of financing in total, as well as efforts to restructure Ethiopia’s $1bn eurobond after defaulting in December 2023.

Photo credit: Francisco Anzola, USA (CC licence Wikipedia)