Welcome to the 51st edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

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Ethio Telecom’s Appeal To The Public: Rizz or Fizz?

Investing

Waiting on Ethio Telecom’s Initial Public Offering (IPO) has been a bit like when your internet suddenly stops working, and your first instinct is to turn your phone off and on like that’s going to fix the national network.

Granted, sometimes it does!

Nevertheless, truth is you don’t really know what the problem is, no one’s explaining anything but still, you try it anyway, maybe buy another data package… and wait for the bars to come back.

Indeed, we’re talking about Ethio Telecom’s big move to sell 10% of its shares to the public and which was expected to close by January 2025. We dialed in months ago… but nobody’s picking up.

So what happened to the plan? 

Ethio Telecom announced in October 2024 that it was going to sell shares at ETB 300 each to raise a solid ETB 30 billion. But, like many good plans, things didn’t quite go as smoothly as expected. Here’s the scoop.

The idea was to get the Ethiopian public involved, with a starting offer for 10% of the company’s shares. The minimum investment was 33 shares (ETB 9,900), and the max was 3,333 shares (ETB 999,900). All this ‘Min/Max’ just to ensure a broad participation of the public from all income levels. 

We did a deep dive into their financials back then, and while Ethio Telecom’s Price-to-Earnings ratio is about average compared to regional competitors like Safaricom, it’s not exactly a steal, but also not super cheap.

The initial deadline for the IPO was January 3rd, 2025. Then—wait for it—the deadline got pushed back by 5 weeks. Now, as of today? Crickets. No news, no announcements, just silence. This suggests that the sales goal isn’t looking too hot.

Let’s be real for a second: expecting to raise ETB 30 billion from the Ethiopian public in such a short time frame, with a max investment cap of ETB 1 million per person, was probably a bit ambitious. 

In most successful IPOs, the big bucks usually come from institutional investors and high-net-worth individuals—think the kind of people who might spend a million or two without breaking a sweat. But Ethiopia didn’t even have investment banks (let alone investment banking know-how) to solicit big buck funds and make it happen until a few weeks ago.

Then, there’s the whole issue with investor skepticism. A lot of analysts weren’t too impressed with Ethio Telecom’s ETB 300 Billion valuation, and honestly, that never inspires confidence. 

On top of that, there’s a little thing called Ericsson. Yes, the Swedish telecom giant could throw a wrench in the works. Back in 2014, Ericsson gave Ethio Telecom a loan, but with one small condition: Ethio Telecom had to stay a public enterprise until the loan was fully paid off. Spoiler alert: there’s still a balance of USD 19 million. And Ericsson hasn’t given the green light for the IPO yet. Not ideal.

It seems Ethiopian Investment Holding (EIH) is still determined to push forward with the 10% sale, mostly because, well, the government could really use the cash to fill budget deficits. But let’s face it: the longer they wait, the less valuable those ETB 300 shares will be, especially with inflation doing its thing. On the flip side, that makes them more attractive to investors like you and me. 

There’s also the possibility that they might take a more modern approach to this IPO, like using actual investment banks. If they do that, they might even remove the maximum investment cap of ETB 999,900. 

And let’s not forget about our friends in the diaspora. If Ethio Telecom wants to raise even more cash, they may have to get rid of that “Residents Only” rule, so they can join the party.

Given our collective experience with Public Enterprises, we’re likely to see a surprise fait-accompli rather than a transparent change of course.

In the long run, the sale is about a whole lot more than just a bit of extra cash. 

If Ethio Telecom successfully goes public, it’s seen as a step toward liberalizing Ethiopia’s telecom sector—hello, competition! 

Publicly traded Ethio Telecom shares could boost the capital market and give Ethiopia a real contender in the global telecom game. 

The government aims to attract foreign investment offering up to an additional 45% stake. EIH pocketing much needed foreign currency. Ethio Telecom will not only acquire best practices to better serve Ethiopian customers but will be able to go head-to-head with regional giants like MTN and Safaricom.

On top of that, this move could be a big boost to Ethiopia’s GDP and position the country as a serious player in the global race for tech, especially when it comes to artificial intelligence. 

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The New ‘Shiny’ Card in Your Wallet: Fayda

Financial Services

- “You Are Unique and Beautiful” 

At least that’s what we were expecting the clerk to say when we went to get our Fayda ID card but maybe we’re just hopeless romantics ❤️

Flower bouquets and chocolate boxes aside, the higher ups of this country are putting faith in Fayda, especially when it comes to addressing one of the biggest issues: labeling the individual.

Fayda, also known as ‘National ID’, is aiming to replace most government issued identification cards with the exception of those who have other functions like a driver’s license.

We tried to put two and two together to see what this means for the financial sector, and spoke to a few banks while we were at it.

Unsurprisingly, they’re all waiting in anticipation, hoping that the new digital ID will: