CONGRATULATIONS GHANAIANS

Your Government has done an excellent job in selling 70% of Ghana Telecom to Vodafone. Vodafone is the worlds biggest and one of the worlds best telecom companies. Ghanaians will forever enjoy the benefits of all the new services being offered by Ghana Telecom in the future.

I read the article published 9th July by Yaw Adu-Out ”Ghana Telecom Majority Sale to Vodafone: Potential Threat to National Security of Ghana” and felt the need to write this article to balance this almost communistic thinking in a world that has embraced international laws and commerce.

Ghana Telecom (GT) was on the brink of bankruptcy in 1999. It was not managed as a telecom company but rather as a state department. The Malaysians brought in an arcane form for management that did not suit Ghanaians and failed. Ghana Telecom was then re-financed by the current Government, restructured and a long process of modernisation took place (normalisation). GT still has a long way to go to compete head on with MTN, Millicom (TIGO), Celtel and all the other international telecom companies established in Ghana. GT led by Vodafone will give the other telecom operators a fair run for their money.

And telecom requires money. There are always new technolgies that needs to be introduced (invested in) to make sure that you offer the customers the modern services and the quality of services they deserve and pay for. Failing this they will choose the operator that does. This is pure and simple market forces at work.

And choice the Ghanaians have. The Government of Ghana has not only during their time in office secured an excellent sale through a long and tough turn-around of GT, but they have also pro-actively de-regulated the whole telecom sector. Again to the benefit of the Ghanaians who now have the luxury of choosing services from some of the best telecom operators in the world. And with Vodafone entering the market I can guarantee that the services and prices will even become better.

The price that the Government has achieved is extremely good. They have secured USD 900 million dollars for 70% of GT from Vodafone. The revenues of GT in 2007 were USD 280 million per year and an operating cash-flow (EBITDA) of USD 42 million. This means that Vodafone were willing to value GT at more than 30 times their operating cash-flow. Vodafone has offered to pay USD 900 millions for 70% of GT that values GT at almost USD 1,3 billion. And by dividing USD 1,3 billion on USD 42 million we derive at 30 times EBITDA. This is an incredable good price and to all you other negative commentators, please bring forward examples of comparable transactions within the telcom sector that gives the same positive financial relationship in favour of the seller (the Ghanaians). In addition to this the Government has secured an ongoing investment commitment from Vodafone in the range of USD 500 million. This is required to continue the re-structuring and turnaround of GT and to secure GT a prosperous position within the competitive telecom market in Ghana.

Amos Safo in his article on 18th July ”Sale of Ghana Telecom Gathers Political Storm” states that NDC will re-nationalize GT if they were to win the next election. Please wake up to the commercial realities of 2008. No sane Government would want to own a telecom operator and continuously be burdened by the constant change in technologies and risk huge future investments to remain competitive. To remain competitive in the telecom sector is all about money and innovation. Do you seriously consider Governments innovative and with limitless supply of money. Even the Swedish Government (probably the most socialist country in Europe) have concluded that they want to exit their current 34% ownership in TeliaSonera (the incumbent telecom operator similar to GT in Sweden). Why? The risks of future ownership is too great even for them.

Ekow Nelson a Ghanaian living in London furthermore states that GT can make USD 2,2 billion in revenues a year and leverage its ownership in One Touch and Sat-3. This statement is beyond me and to secure such a revenue target GT must regain most of its lost market share to MTN, Celtel, Tigo and the others. This is completely unrealistic and a statement made by a person who has zero experience from telecom. However, why do you not invite him back to Ghana and hear him out on his ideas for GT. It may be worth the cost of the airline ticket.

CPP states that they are against the planned sale of 70% of GT to Vodafone as ”It lacks economic merit and will in the long run” and secondly the ”notion that only foreigners can effectively manage our affairs is offensive to our dignity as human beings”. I have myself lived and worked in Ghana for one and a half year, as head of fixed network services in GT. I had the pleasure during this period to meet and work with extremely competent and able telecom executives and engineers in GT. That GT has the human resources and capabilities is beyond doubt. All of the Ghanaians that I worked with were highly educated from the best universities in the world. The issue is therefore not lack of ability to manage your own affairs but the combination of innovation (through active ownership) and money. With the Ghanaian competition within the telecom sector I would never want to be a stand alone shareholder in GT. The decision to sell GT by the current Government is the only way forward for GT. The threat of nationalisation of GT is beyond me as a concept and a concept that was left by most countries a long time ago. Particularly within the telecom sector. The Government has done its job within this sector and the sale of GT is a natural conclusion of this. My suggestion is that the next Government continues the same policies within the telecom sector and make sure that the current competitive climate continues to prosper. It is the only way to secure the best telecom services for the Ghanaians. Even in Norway during the 60’s when oil was discovered, the Norwegians were keen to secure international oil expertise from the US and other mature oil producing nations. This fact did not belittle the norwegians at that time but was rather a necessesity to kick-start the oil sector development. Over time the norwegians took over but much of the oil resources are still being operated and owned by foreign interests.

Selling of the national backbone network ”the GT gold” has been cited by many as wrong. There is nothing wrong with selling the fibre backbone network of Ghana Telecom and Sat-3 as part of this. Sat-3 was bought by GT for USD 23 million. The capacity on Sat-3 is fully utilized and GT together with the other operators in Ghana needs to make additional investments into international cables to secure their own ambitious plans for new Internet services to Ghanaians. Sat-3 will only be a small part of this capacity in the future. GT has a near monopoly on providing fast internet access to Ghanaians through their copper infrastructure (which is being stolen every day because of high copper prices). All mobile operators (Tigo, Celtel and MTN) will start offering their customers fast internet access through their own infrastructure. This means that in the near future there will be as much competition on providing fast internet access as there is currently on providing mobile voice services in Ghana. Therefore the argument that the Ghana State should retain GT to provide this service is mundane and made by laymen without any insigth into the technological advances within modern telecom.

The threat to national security has been cited as a paramount reason for not selling 70% of GT to Vodafone and that Vodafone owned by the Brits will use this to infiltrate Ghana. Again what kind of reality is the person making these statements living in? Of course the telecom infrastructure may be used by political or armed parties to take control over a nation. This should not be joked about and the last time I am aware this was happening was in Pakistan only a year ago. What was telling in Pakistan was that the ruling party (president) took control over all the operators and not just Pakistan Telecom. There is competition in Pakistan similar to that in Ghana and they also enjoy the benefit of international operators investing in Pakistan and creating competition. All the operators had to follow Government instructions and comply by the regulation. Yes this situation may also happen in Ghana – but I do not believe so. Is national ownership of GT necessary to retain national security. The answer is NO. The Parliament should not stop the planned sale because of this immaginary threat. If the Brits wanted to infiltrate Ghana, they could probably just pay one or two executives within GT today a small sum of money and they would control GT. The fact that Vodafone is willing to pay USD 900 million for 70% of GT has nothing to do with national security. It is a pure investment decision. And to state that Vodafone is a British company may be fair – but if you look at the ownership structure behind Vodafone you will definetely not find the British Government – but rather a range of investors from Dubai to Russia. The world is international and telecom is very international.

I therefore again congratulate the Ghanaians on their last coup on convincing Vodafone to set up shop in Ghana and pay USD 900 million for 70% of Ghana Telecom. You Ghanaians will all benefit immensly from this deal in the future. You will be getting better choice, better prices for basic telecom services and you will be able to develop your place within the information society going forward.

The Author: Arild E.Hustad, Managing Director of Telecom Management Partner, 18 years experience within the international telecom sector, Norwegian.