When Ethiopia’s state telecom behemoth announced an initial public offering (IPO) in October 2024, few imagined it would struggle to sell. After all, Ethio telecom reported more than 93 billion Birr in revenues that year, raking in a massive profit of close to 22 billion Birr.
The company—a monopoly until recently—boasts around 80 million subscribers and counts itself among the highest earning state-owned enterprises, alongside Ethiopian Airlines, the Ethiopian Insurance Corporation, and the Commercial Bank of Ethiopia.
Its impressive financials and rapid growth under CEO Frehiwot Tamiru, however, did not translate into investor confidence during the four-month period when a 10 percent stake in Ethio telecom was offered to the public.
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When the IPO closed in February 2025, only 10 percent of the 100 million shares on offer had been sold.
The IPO, meant to usher in a new era of economic liberalization and public shareholding, was a live-fire test for whether institutions, the investing public, and policy coherence were ready for the next chapter. The results suggest they are not.
While the reform rhetoric promises inclusion and dynamism, the IPO laid bare the gaps in transparency, infrastructure, investor education, and public trust. Even a flagship company with tens of millions of customers and a national brand could not overcome those weaknesses.
But why was the IPO such a disappointment and what does it reveal about Ethiopia’s institutional and investment environment?
The Expectation-Outcome Discrepancy
The state monopoly, Ethio telecom, has long been regarded as a ‘cash cow’ for the government, and the firm has only grown in size and reach in the last decade.
The prospectus that accompanied Ethio telecom’s IPO marked its capitalization at an even 300 billion Birr (around USD 2.4 billion at current exchange rates) and its paid-up capital at 100 billion Birr, divided into one billion shares with a par value of 100 birr.
The figures included in the prospectus were taken largely from a re-evaluation of Ethio telecom’s finances conducted by Deloitte over the preceding year. Despite criticism from analysts who argued the numbers were “sketchy”, the prevailing sentiment was that the 10 percent IPO would be quickly and enthusiastically embraced by investors.
It is worth noting the 300 Birr per share price under the IPO announcement carried a 200 percent premium on share value.
In the lead up to the offer, Tilahun Esmael (PhD), head of the Ethiopian Securities Exchange (ESX), predicted the IPO would be “a transformative moment in Ethiopia’s capital market history” and described it as “more than a mere corporate milestone”.
The CEO envisioned the IPO as a model for future listings, where “broader participation, transparency, governance, and accountability become the foundation of Ethiopia’s capital market.”
Tilahun hoped it would be a flagship listing for the ESX, putting both the Exchange and Ethio telecom on the map of global indices.
The company’s executives also had high expectations.
However, doubts surfaced when, in early January, they announced a five-week extension on the IPO. Less than four months later, Ethio telecom announced that only 10.7 million of the 100 million shares offered had been sold, raising a mere 3.2 billion Birr of the 30-billion-Birr target.
A Cautionary Tale from Kenya
While Ethio telecom’s IPO was unprecedented for Ethiopia, it was not without regional parallels. A key comparison often raised is Kenya’s telecom giant, Safaricom, which underwent a high-profile IPO in 2008. The company was and remains a profitable powerhouse, with millions of subscribers and national strategic importance, much like Ethio telecom.
At the time, Safaricom’s IPO was widely promoted, well-structured, and heavily oversubscribed by more than 500 percent. Over 860,000 retail investors participated, making it one of the largest public offerings in East Africa’s history. But despite that initial euphoria, the aftermath carried hard lessons.
Many small Kenyan investors took loans to buy shares, expecting rapid appreciation and liquidity. But due to poor post-offer coordination, technical delays, and market correction, the share price dropped after listing. Refunds to unsuccessful bidders were delayed, and thousands of investors were left disappointed. For some, trust in the stock market was shaken for years.
What Kenya’s experience shows is that even a successful IPO on paper can create lasting disillusionment if logistics, expectations, and post-sale engagement are mishandled. Ethiopia avoided some of these pitfalls, but not all of them.
What Really Went Wrong? A Layered Diagnosis
Analysts observe the reasons behind the IPO’s underperformance are many and interlinked, ranging from policy choices to market communication failures.
A confluence of factors, from trust and timing to market readiness and an insufficient roadshow, and, crucially, the nation’s institutional and investment environment, lurk behind the shortfall that shattered overconfidence in the historic telecom monopoly’s salability.
During a press briefing outlining the IPO, Frehiwot attributed the underperformance to restrictions on who was eligible to buy shares in Ethio telecom, and limited public awareness surrounding investment and securities trading. The terms of the IPO permitted only individual Ethiopian citizens to invest, barring foreigners and institutions while capping individual purchases at one million Birr.
Although opinions vary on how much the restrictions affected sales, there is broad agreement on the lack of experience and public awareness surrounding IPOs and securities trading.
Inadequate Roadshow, Poor Communication Strategy
Among the experts who argue that poor communication played a major role in the underwhelming initial offering is Getachew Beshahwred, founder of Bruh finance, an investment consultancy.
He observes the IPO rollout lacked a comprehensive awareness campaign.
“It is literally a new experience and there should have been much more work done in terms of a roadshow,” Getachew told The Reporter Magazine.
He argues efforts to publicize the IPO paled in comparison to roadshows in well-established markets such as the UK, where offerings are accompanied by months-long campaigns outlining the benefits of equity ownership.
“Here, people didn’t understand what they were buying or why,” said Getachew.
He suggests a degree of overconfidence among Ethio telecom’s leadership led to the neglect of essential groundwork, ultimately resulting in a disappointing outcome. The expert sees the lack of a consistent, accessible communication strategy, especially in a country where many are still unfamiliar with public markets, as a significant missed opportunity.
Tilahun, ESX chief, acknowledges the shortfalls.
“In the future, when we raise capital, for instance, we will go to institutions, debate valuations, and present our case through multiple engagements,” he said.
Institutional Anchoring
Tilahun believes the unreliability stemming from the inexperience and inefficiency of domestic institutions involved in securities trading played a role in the unsatisfactory IPO results.
“Our institutions in this area are still very new. We can neither boast about them nor truly depend on them. Take our pension fund, for instance; while it possesses significant potential, it’s largely unfamiliar with investing. This lack of experience extends to other corporations, even banks and insurance firms. Consequently, it’s difficult to fault them for any shortcomings,” the CEO told The Reporter Magazine.
The IPO’s total reliance on retail investors, the absence of a formal roadshow process, undisputed valuation, and the lack of a back-and-forth with fund or asset managers all contributed to the shoddy performance, according to Tilahun.
“There wasn’t even one investment bank at the time,” he said.
Perhaps another glaring red flag was the absence of an operational secondary market at the time of the IPO. The ESX was still in development, and the prospectus acknowledged that buyers might not be able to sell their shares “in a timely manner, or at all.”
For risk-averse investors especially in an inflationary environment, this lack of liquidity made the investment feel like a one-way ticket.
No Promise of Dividends
While Ethio telecom’s IPO prospectus was transparent in many respects, the risks it outlined, though perhaps standard in legal form, may have signaled more to cautious investors than intended. Instead of reassuring the market, the disclosures likely amplified doubts about timing, governance, and post-purchase value.
The prospectus clearly stated that dividend payments would depend on future profits and board decisions. Experts note that for many Ethiopian retail investors, especially first-timers, this created immediate hesitation.
Tilahun posits that investors with a long-term horizon, such as pension funds and insurance firms, stand to gain the most. Getachew supports Tilahun’s view, anticipating favorable long-term returns, even with initial dividend yields lower than those offered by banks.
Trust, Timing, and Broader Investment Climate
The insights of the experts who spoke to The Reporter Magazine converge around a core principle: If Ethiopia’s capital market is to mature, it must build confidence before capital.
KebourGhenna, executive director of the Pan-African Chamber of Commerce and a long-time commentator on Ethiopia’s economic policies, argued that the offering was doomed not by lack of demand, but by lack of credibility.
“When trust is low and communication unclear, even a profitable company struggles to sell its story,” said Kebour. He also questioned the consistency of policy signals. Why bar foreign investors in one breath, then seek foreign capital in another?
To Keboru, the shortfall was a broader signal that the next phase of reform must be built on trust, not just targets.
On the other hand, the prospectus document also warned that the government, as the 90 percent majority shareholder, retained the right to issue more shares in the future—possibly diluting the value of existing shares. For minority shareholders with limited voting power, this raised fears of losing influence or value over time. Without clear mechanisms for protecting minority interests, the risk of dilution becomes a deterrent, particularly in state-led offerings.
Kebour also highlights another potential deterrent for prospective investors, pointing to Ethio telecom’s declining market dominance.
The firm lost its monopoly status in May 2021 when Safaricom Telecommunications Ethiopia PLC acquired the country’s first-ever private telecom operator’s license for a hefty USD 850 million fee.
Since then, Safaricom Ethiopia has managed to grow its network to cover nearly half of the country’s population. Although it has yet to register a profit since it launched operations in late 2022, the firm continues to invest heavily in the lucrative market and its executives are optimistic about its prospects.
“[Ethio telecom]’s competitor cannot be overlooked,” said Kebour. “It has already captured up to 15 percent of the market share from this long-standing monopoly in the nation’s telecom sector. This trend will likely be even more concerning in the years ahead.”
Restrictions
Several key questions emerge concerning the restrictions placed on the IPO: Will the government consider permitting foreign nationals to purchase shares, either fully or partially? Will institutional investors be allowed to participate? And what about the ceiling on individual purchases?
The Reporter Magazine posed these questions to both Ethio telecom and Ethiopian Investment Holdings (EIH), but both declined to comment. However, the CEO of the Ethiopian Securities Exchange indicated a potential reconsideration.
“It needs a reassessment. If that happens to be one factor,” said Tilahun.
He hinted at a possible shift in approach.
“We still need to thoroughly examine the market’s complexities. The assertion that institutional demand exists requires careful scrutiny. If that proves to be the case, then reconsideration is warranted,” Tilahun told The Reporter Magazine.
Still, he foresees that future IPOs will likely lean more heavily towards retail demand.
The question of whether foreign investors will be allowed to acquire equity in Ethio telecom remains unaddressed.
Kebour, a long-standing and vocal advocate since privatization was first proposed, strongly opposes this possibility. He argues that the fundamental purpose of privatization was to empower Ethiopians as owners of this significant institution.
Turning Setback into Strategy
Ethio telecom’s offering was never just about raising 30 billion birr. It was a test of how prepared Ethiopia is to translate its reform rhetoric into real public ownership—and to align state enterprises, policy frameworks, and citizen investors in a shared economic vision.
As Ethiopia’s first major IPO in decades, it required extensive preparation, trust-building, and financial education. Instead, it arrived in a rush and was met with hesitation. Regardless of the opposing views and criticism, observers all seem to agree the IPO can serve as a valuable learning experience, provided the responsible parties utilize it as such.
Tilahun argues it was not a failure that calls for retreat—but rather a lesson that calls for reform. He described the IPO as a “valuable lesson” that reflects the importance of having institutional investors, strong valuation debates, and a better-prepared retail base before launching major public offers.
During her press briefing in April, Frehiwot indicated Ethio telecom would undertake another offering when the government deemed it was time to do so. It remains unclear when this will happen, and whether the conditions and restrictions that applied to the first IPO would still be in place the second time around.
Kebour warns the disappointment will only play out again if the shortcomings are not addressed before the second offering.
