Sale of Ghana Telecom Gathers Political Storm

A Political storm is gathering over the Ghana Government's recent announcement that it had sold 70 percent of Ghana Telecom for $900 million to Vodafone, the worlds leading mobile telecommunications operator.

Quite unexpectedly, the proposed sale of GT has united the National Democratic Congress (NDC) and the Convention Peoples' Party (CPP) at least for now. The two opposition parties have so far vociferously raised the stakes against the sale of one of Ghana's biggest assets and revenue earner.

The NDC in particular seem not to have a problem with the privatization, except the lack of openness in the privatization process, expressing its disappointment at the "general lack of openness and transparency in the privatization of a major national asset, which has major national security and economic implications." NDC quite rightly questioned why the privatization of GT could not have been subjected to a competitive process as required by the Public Procurement Act of Ghana.

Both parties have stated that they would renationalize GT when they win the presidency. That would be history repeating itself, given that the NPP annulled the sale of GT to Telecom Malaysia when it assumed office in 2001.

While the NDC has decried the price as low, considering the huge assets of GT, the CPP has completely rejected the sale of GT and called on "well-meaning Ghanaians to oppose the NPP government's impending sale of 70.0% shares in Ghana Telecom to a foreign "strategic investor", Vodafone."

In a statement issued earlier this week, the CPP cited two reasons for opposing the planned privatization of GT. Firstly, the CPP says it "lacks economic merit and will, in the long run, cost the state far more than the paltry US$900 million it is receiving for the sale", and secondly that the "notion that only foreigners can effectively manage our affairs is offensive to our dignity as human beings and undermines the CPP's cherished belief that, 'The Blackman is capable of managing his own affairs.' "

CPP argues that a casual look at GT shows that the company is capable of generating profits far in excess of its sale price, "if only we would emplace proper management that is free of political interference and is publicly accountable to Ghanaians."

Part of CPP's fears are based on the failure of the Malaysians and Norwegians managers to turn GT's fortunes around, which supports the fact that the mere transfer of ownership or management to foreigners will not solve GT's or Ghana's problems.

"Currently, Ghana Telecom owns One-Touch mobile services, has near monopoly over fixed lines, dominates broadband services, and has a major share of the internet backbone, SAT-3. Assuming, conservatively, a combined subscriber base of 2,000,000 and daily average net revenue per subscriber of US$3.00, GT can easily make US$2.2 billion per year, or US$11.0 billion in five years, far more than the US$500.0 million investment being promised by Vodafone", says Ekow Nelson, a Ghanaian based in London.

In line with the call for transparency in the deal, in 2007, a Ghanaian Diaspora professional group, called the Ghana Leadership Union (GLU) announced plans to pool resources to buy a controlling stake in one of the country's biggest assets, Ghana Telecom, if the process was open .

In a statement , the President of GLU, Dr. Kwaku A. Danso, said, "the founders of our nation Ghana did not use taxpayers' funds to set up State-owned enterprises (SOEs) only to be sold to foreigners, or to insiders of the government who use proxies to buy these SoE's and leave the real stakeholders with the debts. This practice must be stopped, by any means necessary".

Asked about the investment strategy, the initiative's lead promoter in the UK, lawyer George Asomaning responded, "It is our intention to ensure that as much of the actual investment received gets channeled into the infrastructural development of Ghana Telecom, so as to position the company to deliver on its promise and to return a sizeable profit for the shareholders, the citizens of Ghana".

Nifa Bankroh, the organizer of the "Lets buy Ghana Telecom" initiative stated, "If Ghanaians do not get involved in the acquisition, ownership and management of significant state owned enterprises that are being divested, the likelihood of Ghanaian nationals being able to control the factors that affect their economic future will be marginal at best, and probably negligible.

Ghanaians are becoming increasingly nationalistic when it comes to divesting state assets; so the question of whether Vodafone or any other strategic investor would represent the national interest keeps coming up. The botch sale of GCB and ADB are classic examples of public opinion prevailing over government plans.

The fear is that in return for US$900m, Vodafone will not only assume control of OneTouch (Ghana Telecom's mobile arm), but also, ownership of Ghana's fixed telecom network (both core and access) will be transferred and with it, monopoly over the provision of international, long distance telephone and fixed broadband services.

One Ghanaian analyst has argued that Ghana Telecom's 1.4 million mobile customers represent just over 0.5 percent of Vodafone's global subscriber base of 260 million. How strategic is that for Vodafone? Given that Vodafone or any other strategic investor achieves 100 percent mobile penetration with a relative small population of 22 million people (which is less than 10 percent of Vodafone's subscribers), Vodafone's stated target market share of 25 percent will only represent 2.2 percent of its current total subscriber base and that won't be achieved for another 5 years at least. "So it remains to be seen whether or not this turns out to be as strategic for Vodafone as the government assumes it will be for Ghana."

The worry is that is it really strategic for Ghana to hand over her fixed telecom network to a company which although is the world's largest mobile provider by revenue, has relatively little experience of running or investing in building fixed telecom networks anywhere in the world? What exactly will Vodafone bring in terms of deep and in-house experience to this business?

As the world moves fast toward the digital world, broadband will become strategic for all economies; so the critical need for utilizing ICT for economic growth, as the NDC argued in its statement is pertinent . Currently, Ghana Telecom's broadband is limited to a couple of metropolitan areas and it will be in dire need of further investment if the government wants to extend that reach to many rural people. No doubt the government's e-government and other ICT initiatives for schools, hospitals etc economy will depend on a robust broadband infrastructure. "Yet this single most important strategic asset has been handed over to Vodafone which has by default become a monopoly provider when few, if any, competitive alternatives exist. We are proposing to transfer a public monopoly to a private one and that cannot be good for the future of our country", says the analyst.