Ethio Telecom's 45.4% Earnings Growth: A Strategic Buy Opportunity in Africa's Fast-Maturing Telecom Sector?

Ethio Telecom, Ethiopia's state-owned telecom giant, has emerged as a standout performer in Africa's telecom sector, driven by a blend of infrastructure investment, digital innovation, and a strategic pivot toward financial inclusion. While the company's 2024/25 fiscal year (July 2024–June 2025) saw a staggering 72.9% year-on-year revenue surge to ETB 162 billion ($2.8 billion), the real intrigue lies in its forward-looking projections: a 45.5% earnings growth for the 2025/26 fiscal year. This raises a critical question for investors: Is Ethio Telecom a compelling long-term bet in a sector poised for transformation?

The Infrastructure-Driven Growth Engine

Ethio Telecom's recent success is rooted in its aggressive infrastructure expansion. Over the past fiscal year, the company deployed 1,683 new mobile sites, with 836 in rural areas, pushing mobile network coverage to 99.4% of the population and 86.5% of the country's geography. This expansion has not only boosted its subscriber base to 83.2 million (a 6.2% increase) but also catalyzed a leap in 4G coverage from 37.5% to 70.8%. The rollout of 306 Massive MIMO-enabled 5G sites in 26 cities further positions the company to capitalize on the next wave of data demand.

The financial implications are clear: higher data usage, driven by improved connectivity, has fueled revenue growth. Ethio Telecom's EBITDA surged by 84% year-on-year to 76 billion birr ($537 million), while pre-tax profits jumped 80% to 76 billion birr. These metrics underscore a business model that is scaling efficiently, with infrastructure investments translating into both top-line and bottom-line gains.

Telebirr: A Digital Financial Powerhouse

Beyond traditional telecom services, Ethio Telecom's mobile money platform, Telebirr, has become a linchpin of its growth strategy. With 54.8 million active users, Telebirr processed ETB 2.38 trillion in transactions in the 2024/25 fiscal year, including 13.2 billion birr in microloans and 11.2 billion birr in digital savings. The platform's integration with government services and its ability to handle 100 transactions per second (scalable to 1,000) positions it as a critical enabler of Ethiopia's digital economy.

Telebirr's success is not just a revenue driver but also a tool for financial inclusion. By reaching 5.9 million residents in previously unserved rural villages, the platform is addressing a long-standing gap in Ethiopia's banking infrastructure. For investors, this represents a dual opportunity: recurring transaction fees and a growing user base that could eventually rival regional fintech leaders like Kenya's M-Pesa.

Privatization Delays and Strategic Uncertainty

The Ethiopian government's decision to pause its privatization plans for Ethio Telecom has introduced a layer of uncertainty. Originally slated to sell up to 45% of the company to foreign investors, the government has indefinitely shelved the initiative due to macroeconomic pressures, foreign exchange shortages, and political instability. While this delay keeps Ethio Telecom fully state-owned for now, it also removes a potential catalyst for near-term valuation growth.

However, the absence of privatization does not negate the company's long-term potential. Ethio Telecom's CEO, Frehiwot Tamru, has emphasized that the company remains focused on affordability, rural connectivity, and digital sovereignty. The government's cautious approach may ultimately lead to a more strategic privatization in the future, particularly as Ethiopia's digital infrastructure becomes a more attractive asset.

Risk vs. Reward: A Calculated Bet

Investing in Ethio Telecom is not without risks. Political instability, currency depreciation, and regulatory unpredictability are persistent challenges in Ethiopia. Additionally, the entry of Safaricom Ethiopia—a subsidiary of Kenya's Safaricom PLC—has intensified competition, forcing Ethio Telecom to slash prices and innovate rapidly.

Yet, the company's financial resilience and strategic positioning in a high-growth market cannot be ignored. With a projected 45.5% revenue increase for 2025/26, driven by data demand and Telebirr adoption, Ethio Telecom is demonstrating the kind of compounding growth that investors covet. Its infrastructure investments are laying the groundwork for a decade of expansion, and its role in Ethiopia's digital transformation ensures a steady stream of government support.

The Verdict: A Strategic Buy for Long-Term Investors

For investors with a 5–10 year horizon, Ethio Telecom presents a compelling case. The company's infrastructure-led growth, digital financial innovation, and potential for future privatization-driven value unlock align with broader trends in Africa's telecom sector. While short-term risks remain, the long-term fundamentals—83.2 million subscribers, a 70.8% 4G penetration rate, and a Telebirr platform on the cusp of mass adoption—suggest a business that is not just surviving but thriving in a rapidly evolving market.

In a continent where telecom is the backbone of economic transformation, Ethio Telecom's 45.4% earnings growth projection is more than a number—it's a signal of a company poised to lead Ethiopia into the digital age. For those willing to navigate the risks, the rewards could be substantial.