Ghana’s telecom industry: Time to bring in home-made players

MTN, since its entry into the Ghanaian telecoms space, has constantly posted impressive growth while its multinational counterparts, Vodafone and AirtelTigo seem to struggle behind. Glo made a very gallant entry into the market, but now it is virtually non-existent, as they have cut back on the coverage and focused solely on the Ghanaian triangle of Greater Accra, Ashanti and Western regions.

This concentration in the three major regions of the country and their environs, has left a wide range of dark spots across the country. The National Communications Authority’s Quality of Service Reports are there to show. The industry, nonetheless, is growing on the back of MTN’s significant growth. So, what is driving MTN’s consistent growth in Ghana’s telecoms sector?

One key explanation to MTN’s continuous growth is the nature of the service providers’ tower co-location arrangement. There is recorded evidence to show that the leading tower company – ATC Ghana, which commands about 60% of all towers in the country and about 85% of co-location towers, is a strong ally of MTN in particular, due to the process by which they acquired their towers from operators. More details on this seeming monopoly and how it is playing out can be found in the article, ATC Ghana’s de facto SMP status and implications for smaller operators | TechGH24.

The implication of this bond between MTN and ATC Ghana implies that any new entrant would first have to contend with this strong bond before resolving any other challenges. Meanwhile, it is a regulatory requirement for new entrants to explore tower co-location opportunities, and only mount their own towers if co-location is not feasible. More on that can also be found in the article Co-location tower cost suffocating smaller operators | TechGH24.

In any industry, when one company is dominating its market, consumers usually feel unfairly treated in terms of choice of services provided. Surely, a dominant and profitable company would keep on investing, and MTN keeps investing heavily. This equally dictates prices on the market through all kinds of innovative packages.

Smaller operators find it difficult to compete on prices as financial pressure mounts on them. In the telecom industry, dominant companies would charge premium fees for calls to their competitors’ networks with cheaper rates for on-net calls.

This is a strategy to discourage their own subscribers from calling other networks, and to rake in more profit from on-net calls. Dominant companies are also likely to find any reason to avoid sharing their infrastructure or facilitating access to it, especially to their competitors. A typical example of this is the skewed co-location arrangement that favors MTN more than any other telecommunication company, based on lease-back contracts. This situation is usually to the advantage of the dominant player rather than that of customers, who are left with virtually no choice.

Ministry of Communications declares MTN SMP

Many years ago, European and US regulators ensured fair competition in the telecom industry by facilitating infrastructure sharing and ensuring seamless cross-connect communications at a fair cost to telecom operators and customers. Ghana’s Ministry of Communication and Digitalization, with consumers’ interest in mind, declared MTN a Significant Market Player (SMP) in June 2020. With market shares on voice, data, mobile money estimated above 75%, this was a much-needed call as the rest of the industry was literally and financially suffocating, running at huge losses and unable to invest.

Unsurprisingly, MTN took the government agency’s declaration and its accompanying regulations and restrictions to court as the financial impact the declaration had on the company was seen as significant. However, the necessary regulatory interventions have been set in motion to compel the operator to implement measures that will allow other telecom players to be more competitive.

Despite those regulatory measures, MTN’s dominance and financial performance does not seem to have suffered from this decision at all. MTN, no doubt, has a solid team and leadership that are navigating the regulatory interventions skilfully. But their continuous growth is also because competition is not doing much to take advantage of the SMP regulatory interventions to grow as expected.

Airtel-Tigo Merger

In 2017, three years prior to MTN being named SMP, Airtel and Tigo merged, and the promise of this merger was enticing. In a fragmented market, where everyone, but MTN, was losing financially, two large players joining forces was, on paper, an excellent prospect for the Ghanaian telecom industry. Customers were promised the best of both worlds, and finally an operator able to invest and compete with the dominant player.

The reality was, however, different, as both companies could not agree on a common strategy and capital allocation to make the merged company, AirtelTigo, the formidable competitor it was intended to be.

With each party owning 50% of the merged entity, nothing could ever be agreed on, and AirtelTigo’s strategic decisions were deadlocked each time. So, on paper, the merger was great, but execution failed. The result was more losses, both financial and in terms of customers. After coming to the realisation that they could not agree anymore, they could both afford to walk away from Ghana, leaving their business entirely in the hands of the Government.

Vodafone

It is not very clear why Vodafone, in which government holds 30% shares, has also missed on the available opportunities in the sector. The group is one of the largest operators in the world, and surely knows all the industry secrets and best practices from all their Opcos around the world. Yet, Ghana has proven to be a complex market for them.

A former Vodafone Ghana CEO did state in public once that even though government holds 30% of the company, it does not contribute 30% of Vodafone’s operational cost. Secondly, Vodafone seems to be positioned as an “elite” network – so whereas they have very lofty customer care packages for their high-end customers, the greater majority of the customers seem to always complain of poor customer services from Vodafone. At some point, a Vodafone Ghana CEO openly described complaints by fixed broadband customers as “rubbish,” something that badly affected their customer base.

Indeed, in more recent times, Vodafone seems to have automated their entire customer service process and have left customers in the hands of a chatbot called ToBi. Customers hardly get to speak with humans; and ToBi has a penchant for terminating calls on customers even when one’s issues have not been fully addressed. This goes to reinforce the notion that Vodafone is elitist in their thinking, given the fact that the Ghanaian population is largely not tech savvy and not many members of the population can even navigate their way through a chat with a bot.

A few months ago, people posted on Facebook that they had been in a queue for months after applying for Vodafone Fixed Broadband (FBB). The problem seemed two-folded, either there was no availability on the network or Vodafone did not have the needed investment to connect these clients. How else would you explain an inability to quickly sign on customers given that Vodafone FBB is prepaid – its money earned even before customers access the service.

Again, Vodafone boasts a lot about having the blueprint for mobile money. They often cite Kenya’s M-Pesa, which was started in March 2007 by Safaricom, a member of the Vodafone Group. In Ghana, however, Vodafone did very little to show they understood what works for Ghanaians. They also failed to take risks with investing in mobile finance in Ghana early enough. MTN took the risk and invested when there was insufficient returns from the industry. As a result, MTN has for many years been the overwhelming market leader in that space as well, while Vodafone, the supposed blueprint holder, is only now emerging on the back of free money transfers to all networks.

Another point is that Vodafone has over the years focused on brand campaigns and brand properties to the detriment of investments and generating excitement about the network architecture – it is still the biggest in terms of FBB. Why is the Opex budget not directly aligned to the Capex budget? When last did customers see a brand campaign about the network infrastructure and availability? Surely, it is the network that brings customers and delivers on revenue. To say the least, brand campaign only creates impression of what is not, as though it is.

Lessons from Vodafone and AirtelTigo

So, what are the lessons learned from the AirtelTigo and Vodafone struggle in Ghana, and from the telco industry, generally speaking?

Firstly, large operators can be successful and profitable elsewhere, but Africa requires a differentiated approach than Latin America, Europe, or India. Success in those jurisdictions is not a guarantee of same in Ghana or Africa.

Groups born in Africa, like MTN, are successful on the continent, because they understand that on a large continent such as Africa, a localised approach is crucial. There are many nuances to the continent, and even within each country. Take mobile money for instance. MTN, an African born-operator, invested in it at a time when Ghanaians only understood over-the-counter service rather than self-service. It had many risks, but MTN was bold to go with it, while Vodafone was touting an ideal process but never took the risk.

Unlike many multinational groups, African-born companies have a long-term view of the market. They are committed to the continent, because there is nowhere else for them to go, and they understand the continent, its complexities, and challenges. They will not walk away if they face challenges. What frustrates multinationals from outside of Africa, does not frustrate African-born operators.

Secondly, where large non-African groups constantly have to decide how to allocate capital and investments to their markets, smaller groups are able to attract and allocate capital much quicker. They are able to constantly attract fresh capital, foreign and local to support their expansion strategy. This is explained by the fact that:

1. Their lean structure allows them to make decisions quickly,
2. They take more rational decisions and focus on the essentials and
3. Unlike large groups, smaller groups do not have to choose in which country to allocate capital – they have only a few countries to worry about, hence they can commit.

It is very clear that in Ghana, no telecom operator, but MTN, kept investing heavily over the past years. That is also why MTN was first with 2G, 3G and the only operator currently with full 4G, despite the high cost of the license, while the other large operators have stayed off due to the cost of the 4G license.

So, while MTN was investing in Ghana, the other big players were investing in other markets while minimizing their commitment to Ghana. This was because they could afford their losses in Ghana, as they deemed Ghana not worth their effort anymore. Airtel and Tigo walked away from Ghana and other parts of Africa, while Etisalat did the same in Nigeria. They can afford that.

Time for home-made solutions

When Ghana decided to issue 4G licenses in 2011, there was a deliberate exclusion of all multinationals, and the licenses were reserved for only locals. Deliberate, but limited regulatory interventions have been put in place to ensure that locals thrive and become influential on the market. Today, we have a few locally owned BWAs (Surfline, Telesol, Broadband Home, Blu and BusyGhana) which have virtually coiled into oblivion, struggling on the periphery of the industry.

Nonetheless, there are still many instances in the world where smaller players have managed to keep at par with larger competitors. A good example can be found in the United States, where, alongside the main operators, a large number of regional players operate in the various states. A similar example exists in Europe, where smaller groups successfully compete with the international telecom giants.

Looking ahead

It is time for Ghana to allow smaller groups to take over from multinationals. Ghana needs less arrogance and more commitment in the telecom industry. As a result of arbitrages and decisions made in the headquarters of large telecom groups, Ghana has not seen the much-needed investment in its telecom sector. This industry is led by technology, for which there is the need to keep up with innovations. While the world is looking at 5G, with some even mulling over 6G already, only one operator in Ghana owns a full 4G license. We need smaller success-hungry telco operators instead of complacent and arrogant large groups.

When these smaller operators knock on the doors, authorities/regulators should welcome them above everyone else. They will also need to ensure that fair competition is in place to deliberately incentivise new entrants to deploy 4G technology, catch-up on innovation and actively contribute to the success of mobile money, tech entrepreneurship and attract more capital into the country. Those are the true and practical principles of local content, and not just issuing licenses to local businesses.

One key policy intervention expected from the regulator is with regards to the tower co-location arrangement. That is the key driver of the SMP’s continuous advantage over all other operators. There is a need for smaller operators and new entrants to have a less expensive access to co-location towers so they can actually compete.

When all this is done, fair grounds will exist, and the ultimate beneficiary will be the consumer, who today, despite the four mainstream operators, does not have much choice. In the medium to long-term, this approach will be the best to protect employment and create new opportunities.