Don’t Confuse Ethio Telecom with GERD Bonds: The Investment You Need to Understand











By- Tsegamlak Solomon

Ethio Telecom is Not GERD: Your Money is Not a Matter of Patriotism!

Misguided Patriotism in the Ethio Telecom IPO

Following the announcement of the Ethio Telecom IPO, several media outlets, particularly government-affiliated ones, have been framing the sale of shares as a matter of national pride and patriotism. While such enthusiasm is understandable, it’s important to clarify that Ethio Telecom is not the GERD (Grand Ethiopian Renaissance Dam), and its shares are not comparable to the GERD bonds.

Lessons from the GERD Bonds: Patriotism vs. Financial Investment

From a securities law perspective, one of the major shortcomings in Ethiopia’s capital market history was the handling of GERD bonds. These bonds were primarily presented to the public as a patriotic contribution to the country rather than a financial investment. Many viewed it as their duty to support the nation through purchasing GERD bonds. For the record, I would have preferred to see the GERD bonds listed on the exchange. However, back then, Ethiopia lacked formal capital market regulation, and the initiative was driven more by national sentiment than financial returns—rightly so, at that time.

A New Era: The Capital Market Framework

Today, we are in a very different era. Ethiopia now has a formal capital market framework and a regulatory authority overseeing how securities are offered and advertised to the public. It’s crucial to note that in the case of Ethio Telecom’s IPO, the public is essentially buying out the government’s stake. This is not a direct investment in Ethio Telecom itself. I will expand on this point in a later discussion, but for now, the public should make decisions based on financial merits, not patriotism.

The Risk of Misguided Investments

The current narrative, particularly pushed by state media, framing the Ethio Telecom IPO as a national project, carries significant risks. If this approach leads to misguided investments based on patriotism rather than sound financial judgment, the outcome could be catastrophic. It risks eroding public trust in Ethiopia’s budding capital market. Public confidence is essential for the market’s growth, and undermining it at this early stage could have long-lasting negative effects.

Your Money is Not Going to Ethio Telecom!

The Distinction: Buying Government Stake vs. Investing in Growth

One important aspect of the Ethio Telecom IPO that needs to be clearly understood is that the public is essentially buying out the government’s stake, rather than directly investing in Ethio Telecom. This is a critical distinction for potential investors to grasp.

No New Capital for Ethio Telecom

When purchasing shares in this offering, the capital raised is not being injected into Ethio Telecom for growth, expansion, or operational improvements. Instead, the funds go to the government as it sells its existing equity in the company. As a result, Ethio Telecom will not receive new capital from this transaction.

So, to put it clearly: you are buying Ethio Telecom shares, not investing in its growth.

Understanding the Financial Dynamics

There is nothing wrong with buying the shares, but it’s essential to approach this investment with a clear understanding of the financial dynamics involved. Of course, this also means that the capital raised is less than what would be required if the public were to acquire a 10% equity stake in Ethio Telecom through a dilution process. This is an important factor to consider when evaluating the investment opportunity.