Kenya’s Cash, Ethiopia’s Risk: Inside the Sh19.6bn Bet Safaricom’s Own Partners Wouldn’t Match

Safaricom told the market a story of triumph in May: attributable profit of Sh95.6 billion, the highest ever recorded by an East or Central African corporate; group EBITDA up 27.9 percent to Sh220.3 billion; a record Sh80.1 billion dividend, up 66.7 percent on the year before.

Buried in the same set of accounts, in language so technical it reads as routine, is a second story that Safaricom did not choose to lead with one about who is actually paying for the company’s Ethiopian expansion, and who has quietly stepped back from paying.

In the year to March 2026, Safaricom and its South African parent Vodacom exclusively funded a Sh21.3 billion capital call into Safaricom Telecommunications Ethiopia. Safaricom alone put in Sh19.64 billion, an amount equal to roughly 11 percent of the free cash flow its Kenyan operations generated over the same twelve months.

Its three co-investors Japan’s Sumitomo Corporation, British International Investment (BII), and the International Finance Corporation (IFC), the World Bank’s private-sector arm sat the round out entirely. Their combined stake slipped from 42.59 percent to 39.81 percent. Safaricom’s rose from 51.67 percent to 54.17 percent.

Kenyan shareholders got a record payout. They also became owners of a larger share of a business that lost Sh21.2 billion this year and needs several billion dollars more before it is done.

The subsidy, in the company’s own numbers

The segmental split leaves little room for spin. Safaricom’s Kenyan business generated Sh400.8 billion in service revenue and Sh182.3 billion in EBIT, throwing off Sh173.6 billion of operating free cash flow up 16.7 percent on the year.

Ethiopia generated Sh14.1 billion in service revenue and posted an EBIT loss of roughly Sh30 billion, with negative operating free cash flow.

Total funding pumped into the Ethiopian unit since its 2021 greenfield launch has now reached Sh341.7 billion, of which Safaricom’s own direct contribution stands at roughly $1.2 billion and that figure jumped sharply in the year just reported.

None of that Sh19.64 billion could simultaneously fund a bigger dividend, faster Kenyan network capex, or balance-sheet strengthening at home. It went instead into a subsidiary that, on the group’s own admission, is not yet paying its way. Kenyan shareholders collected a record 83 percent payout ratio this year.

They also absorbed, without a shareholder vote on the specific allocation, a materially larger economic claim on a foreign unit still burning cash.

A test of conviction three partners failed

A pro-rata cash call is the closest thing frontier-market investing has to a lie-detector test. Every shareholder is asked, in effect, to restate how much they still believe in the thesis they signed up for. Sumitomo, BII and IFC answered by not writing the cheque.

The shareholders’ agreement lets them reverse the dilution later the ‘catch-up’ right Safaricom’s annual report describes almost as a footnote. They can buy back their lost 2.78 percentage points directly from Safaricom and Vodacom, or lead a future round the majority sits out.

It sounds symmetrical. It is not.

Any catch-up will be priced off Ethiopia’s valuation and terms at the time it is exercised and if Safaricom’s additional capital and operational push succeed in narrowing losses as management now projects, that future price will be higher than the one on offer in the round the minorities just skipped. By conserving cash today, the development-finance partners effectively sold forward a slice of Ethiopia’s upside to the operator that kept funding it.

Source: Safaricom PLC 2026 Annual Report

Why BII may have blinked and why IFC’s blink means more

The instinctive reading that all three partners quietly lost faith in Ethiopia is too simple, and the reporting record complicates it. BII’s own recent disclosures show an institution under its own capital strain: it has relied entirely on UK aid-funded equity and retained earnings, that funding model is tightening as UK aid budgets shrink, and BII is mid-way through a 2026 strategy refresh explicitly wrestling with how to keep funding frontier and fragile markets with a constrained balance sheet. Sitting out one telco cash call in Ethiopia may say as much about BII’s institutional cash position in 2026 as it does about Ethiopia specifically.

IFC is a harder case to explain away.

Its global commitments hit a record $71.7 billion in the last full year reported, and it has just launched an originate-to-distribute strategy specifically designed to free up balance-sheet room for new frontier investments.

An institution actively engineering more capital capacity globally, at the exact moment it declines to defend its Ethiopian equity stake, is making a comparative judgment not pleading poverty. Sumitomo, a commercial strategic investor with no development mandate to fall back on, has offered no public rationale at all for standing down. Its silence is its own kind of signal.

An institution built to take exactly this kind of risk chose, this year, not to. That is the detail the ‘catch-up clause’ framing is designed to soften.

The turnaround is real and so is the next bill

To be fair to Safaricom’s optimism, the underlying trend supports it more than a skeptic might expect. Ethiopia’s EBITDA loss narrowed 64.8 percent to Sh15.1 billion, with the second half of the year losing only Sh2.7 billion against Sh12.4 billion in the first half a trajectory steep enough that management has now put a firm date on group EBITDA breakeven: March 2027. Stripped of currency effects, the improvement looks even sharper: the Ethiopian birr depreciated 23.7 percent against the US dollar and 39.6 percent against the euro during the year, meaning local-currency service revenue actually grew 130.9 percent even as shilling-denominated figures grew a slower 58.3 percent. M-Pesa Ethiopia more than doubled its active user base to 5.2 million.

But the same executives celebrating that trajectory have also quietly flagged the scale of what remains. Safaricom Ethiopia’s own chief executive has said the business needs a further $5 billion in investment to reach full national coverage more than double everything injected into the unit since 2021. Safaricom’s group finance chief has confirmed there is no fixed timeline for the next capital tranche beyond an initial Sh20 billion already committed, only that the company will return to the market for more when ready.

Every future cash call is another opportunity for the minorities to either defend their stakes or dilute further and another data point on how serious their ‘catch-up’ intentions really are.

Safaricom has also flagged, in its own operating-environment disclosures, that Ethiopia’s June 2026 elections and the risk of aid-flow disruption sit alongside currency and competitive pressure as live threats to the breakeven timeline.

What the dilution actually buys Nairobi

Strip away the accounting and what remains is a straightforward transfer of control. Safaricom and Vodacom’s combined stake has risen to 60.19 percent.

That is a majority large enough to set the pace on further funding rounds, on the timing and structure of any future dividend from Ethiopia once it turns cash-positive, and on the terms of any eventual restructuring or exit.

The minorities retain paper protections.

They have less capital at risk and, until they choose to re-up, correspondingly less practical leverage over how those decisions get made.

For Kenyan shareholders and for Safaricom’s board, the record FY26 dividend and the funding gap sitting one line below it are two faces of the same coin.

One is the reward for a highly profitable, near-monopoly domestic franchise.

The other is the bill for a bet that Safaricom’s own strategic partners including two institutions whose entire purpose is absorbing exactly this kind of frontier-market risk were not, this year, prepared to keep paying in full.

Whether that changes at the next cash call, or whether Nairobi’s cash keeps carrying Addis Ababa’s growth, is the number worth watching in Safaricom’s FY27 accounts not the dividend headline.