Ethio Telecom struggles as IPO falls short of expectations

In early April 2025, Ethiopia's state-owned telecommunications company, Ethio Telecom, launched an initial public offering (IPO) aiming to boost investment in the country's recovering economy. Despite the government planning to sell 40% of the company, only 10.7% of the shares were sold, falling far short of its goal to raise $240 million. The IPO attracted 47,377 investors but generated only 3.2 billion Ethiopian Birr, equivalent to $24.5 million. This dismal performance prompted Ethio Telecom to consider a second round of sales targeted at foreign investors, acknowledging that restricting the initial offering to Ethiopian citizens proved ineffective. The lackluster showing of the IPO reflects ongoing challenges for the Ethiopian government, which has sought to liberalize vital sectors like telecommunications and banking. Previous attempts to draw in foreign investors have faced setbacks, as illustrated by the withdrawal of major companies such as Orange and Emirates Telecommunication Group from negotiations with the government. Despite its successful IPO registration on Ethiopia's new stock exchange earlier this year, the company is now grappling with competition from Safaricom, Kenya’s first privately-owned telecom firm in Ethiopia. Safaricom has struggled with issues such as regulatory favoritism towards Ethio Telecom and limitations on expansion due to regional conflicts in the Horn of Africa. The Ethiopian government is also managing broader economic challenges, including high inflation and lackluster interest from foreign investors despite efforts to negotiate loans from the International Monetary Fund and to float the local currency. Ethio Telecom remains one of the country’s most profitable enterprises, alongside Ethiopian Airlines, but its ability to sustain market leadership in a more competitive environment is uncertain. Zemedeneh Negatu, CEO of the Commercial Bank of Ethiopia Capital, believes that Ethio Telecom is still poised to attract investors, citing its robust financial performance. The company is viewed as capable of delivering steady dividends over the long term, consistent with its earlier profitability. As it stands, Ethio Telecom's performance in the IPO is a reflection of both a specific failure at the level of investor confidence and a broader concern regarding Ethiopia’s economic direction under pressure from external factors. Insufficient initial interest in the IPO could indicate that the country’s economic policies and investor relations require reevaluation to enhance confidence and attract both local and international investment moving forward.