Comparing Ethio Telecom's IPO with Private Banks: Key Insights for Investors

With the Ethio Telecom IPO now available, many investors are assessing its attractiveness compared to Ethiopia’s private banking sector. The chart provided illustrates the Earnings Per Share (EPS) of Ethiopian private banks, adjusted to a 1,000 Birr par value. This adjustment is crucial because these banks have not been publicly traded and do not have a market price. Standardising EPS allows for a more meaningful comparison across institutions.

10/20/20241 min read

Comparing Ethio Telecom's IPO with Private Banks: Key Insights for Investors

With the Ethio Telecom IPO now available, many investors are assessing its attractiveness compared to Ethiopia’s private banking sector. The chart provided illustrates the Earnings Per Share (EPS) of Ethiopian private banks, adjusted to a 1,000 Birr par value. This adjustment is crucial because these banks have not been publicly traded and do not have a market price. Standardising EPS allows for a more meaningful comparison across institutions.

Top Performers

Awash Bank leads with an EPS of 577 Birr, followed by Hibret at 507 Birr and Dashen at 442 Birr.These first-generation banks, being older and more established, dominate in terms of profitability.

Meanwhile, Zemen, a second-generation bank, stands out with an EPS of 430 Birr.

New Entrants

While new entrants in the banking industry, such as Tseday, Siinqee, and Shebelle, have reported positive EPS due to their extensive experience as credit unions, others have experienced significant losses. This highlights the
challenges they face in adapting to the dynamic economic environment and achieving profitability during their growth phase.

Ethio Telecom's Position

Ethio Telecom has an earnings per share (EPS) of Birr 190, adjusted to a Birr 1,000 par value, based on earnings of ETB 19 billion in 2024. With an IPO price of ETB 300 per share, this results in a price-to-earnings (P/E) ratio of
15.8x. The company boasts an unrivalled market share of 94.5%, driven by its 78 million subscribers, and its mobile money platform, telebirr, offers additional growth potential.

Conclusion

For investors, private banks offer solid profitability, particularly in well-established institutions. On the other hand, Ethio Telecom’s dominant position in telecom and fintech provides exciting long-term growth opportunities. The choice between the two depends on whether you seek immediate earnings from banking or expansion potential from the telecom sector.