Tue 22 Jul 2008
Vodacom Tries to Jump on the Ghana Mobile Bandwagon
Posted by Melissa Ho under General, Ghana, Mobile Phones, TIER-List
I meant to post this a while back (like 3 weeks ago when the announcements first started coming out), but this is interesting and relevant for a lot of us playing around in the Ghana telecommunications arena:
Vodafone in Ghanaian mobile deal
http://news.bbc.co.uk/2/hi/business/7487821.stm
Page last updated at 13:41 GMT, Thursday, 3 July 2008 14:41 UK
Mobile phone firm Vodafone is to expand its presence in Africa by buying a controlling stake in Ghana Telecom for £452m ($900m).
I’m not sure what this means. My first question (almost selfishly) was whether Vodafone would continue the program enabling doctors to talk to each other for free on OneTouch lines (courtesy of Brian Levine from NYU and Mr. John Annoh Quarshie from OneTouch). But the larger order questions are ones of management - how much upheaval will Vodafone bring to GT? Will it be more of the same years of mis-management (constant re-organizations, blame shifting, and strategic monopolistic practices aimed towards, well, understandably, maintaining their market control), or will Vodafone use GT’s strategic position wisely and maybe actually stimulate healthier telecommunications growth in Ghana?
Good or bad for Vodacom? Good or bad for Ghana? Well, I personally think it’s a mix. Ghana’s opposition party thinks it’s a bad deal and the parliament blocked approval until the next meeting in October - possibly trying to hold out for Ghana’s presidential elections in November. Their reasons? I don’t know what the real reasons are - maybe Eric O or someone else in Ghana can speak to that - but the article says they want to hold out for more money. I hate hearing that from politicians - but in Ghana who can trust the businessmen to actually strike fair deals? In the long run, though, I think the cash is less important than the change of management (and perhaps the shares), and I don’t know enough about Vodafone to know what tidings this holds for Ghana as a whole. I do think that this is really interesting from the perspective of the multi-national company diving into african mobile market fray. Buying out the entire national monopoly dsl/landline/mobile company seems a bit drastic, especially given GT’s history. But given their progress on DSL broadband provision in the past year, I can’t say this is a bad move. While I was there, they managed to expand to Takoradi, Cape Coast, and Tamale, covering three additional regional capitals within a span of just a few months, and simultaneously wiping out the ISP competition in those markets.
From a mobile communications standpoint, Vodafone’s acquisition of GT might be coming at a good time, closely following the heels of MTN’s recent acquisition of Areeba (formerly known as Spacefon). Jump on the Bandwagon. What the newspaper articles really fail to say, then, is that Vodafone is not just acquiring the mobile division of GT (aka OneTouch, the third largest mobile provider, and sometimes the most reliable, if there is coverage), but Vodafone’s acquisition (if approved by Parliament) would also cover the rest of GT as well. And this is strategic. GT controls the international long distance market, access to the SAT3 submarine fiber link, and most of the DSL broadband market, as well as 90% of the landline market. $900m for a controlling stake in a telecommunications company that serves 22 million people actually would seem pretty cheap, if I didn’t think that the company was in deep need of a management overhaul. Last time I checked, they were months behind on connecting to the Ghana Internet Exchange because they were doing yet-another company re-org, and couldn’t decide who was in charge of it. So I’m undecided on whether this is a fair deal or not for Ghana, but I do think that change might be a good thing!
Anyways.. news of interest, a couple of editorial remarks. We’ll see what happens in October!
July 22nd, 2008 at 8:28 am
From Eric Osiakwan (via TIER Mailing List):
Below is the latest on the deal…..
The much anticipated debate on the controversial deal on the sale of Ghana Telecom to Vodafone has failed once again to come on leading to a suspension of the deal.
The suspension follows the failure of the Joint Committee on Finance Communication of Parliament to lay the report on the deal between the government and Vodafone before the House.
The House which rose on Friday, July 18, 2008 for recess was expected to debate the bill on Thursday but it postponed the debate to Friday when the bill would have been ratified.
But the sale has now been suspended indefinitely.
The Majority Leader of Parliament, Mr. Abraham Osei Aidoo said members of the House needed some time to study the report and make informed debate on the deal.
He said members of the House may be recalled during recess to consider the bill and other important bills.
He rejected suggestions that the government bowed to pressure.
According to him, if the report had been laid early enough to enable members study it, the bill would have been passed.
He said the suspension will allow adequate time to study the report and make useful contributions to ensure that the deal is well refined.
Reacting to concerns that government had gained notoriety for pilling up bills and trying to push them through on the last day of sitting of a session, Mr. Aidoo said the practice was bad.
He however stressed the need for the House to be well resourced in order to effectively deal with issues before the house.
Government entered into a deal with Vodafone to offload its 70 per cent shares valued at $900 million.
But the deal was vehemently opposed by opposition political parties and civil society organisations who saw it as unprofitable deal.
They argued the sale of GT to a foreign company amounted to a demonstration a lack of confidence in the Ghanaian.
Alhaji Asuman Banda a business magnate detests the very idea of the sale.
“it is better to mismanage ourselves than to allow somebody to manage us”,he said.
But government argued the sale was necessary to save the company which it said was in debt.
Story by Malik Abass Daabu
July 22nd, 2008 at 8:48 am
I love the argument that “the sale of GT to a foreign company amounted to a demonstration a lack of confidence in the Ghanaian.”
We won’t mention the fiasco that happened when Ghana repurchased Alcoa from its foreign company, and the subsequent preventable year-long power crisis? I have every confidence in the individual Ghanaian, and hold most of my Ghanaian friends in very high esteem. It’s just some of the Ghanaian bureaucrats that I’m a little worried about.
At the same time - I’m glad they didn’t rush this decision through the parliament on the last day, and that they are taking time to consider the ramifications. The 70% stake given over does seem, well, almost unprecedented (exceptions: Guatemala, Guyana, Jamaica), and like whoever proposed the deal was trying to set it up so the parliament would never approve it, or trusting that they would be panicked enough about GT’s $500M debt that they would not notice and just take the deal.
Some of this boils down to whether Vodafone is trustworthy?
July 22nd, 2008 at 8:49 am
From Charles Selorm via TIER Mailing List:
Melissa,
Interesting points raised there! I will try to enumerate some of the reasons for the minority’s determination to blocked this deal.
1. They are of the view that GT is undervalued and have asked the bid to be reviewed higher. This is an interesting one because it is open knowledge that an independent transactions advisor (Ecobank Development Corporation) was appointed to value GT’s assets so i presume a good job? was done on that. So, GT was valued at about $1.6 billion by EDC, i heard but the government gets $900 (which is a 70% stake of total value after government sat with Vodaphone to negotiate). Anyways, GT is indebted to the tune of about $400 million so that leaves government with $500.
2. Strategic national assets like the Voltacom fibre (an asset of the Volta River Authority, the power generating company) and the national fibre backbone have been included in this deal in what government describes as the expanded GT - first phase of the national fibre backbone was built with a concessionary loan from a Chinese bank. Information has it that because the same bank is financing the Bui Dam projects, they have decided to stop financing the fibre backbone project. The minority and many Ghanaians have kicked against adding these assets to GT. They argue that if GT alone was valued for as much as $1.6 billion, then it was necessary to add a little more value to the expanded GT. Also, it is important to note that this will give competitive advantage to GT/Vodaphone when this deal pulls through. The debate has been huge on this one, sometimes immotional and is still going on…
3. Lack of clarity on specific targets to be met by vodaphone, so the argument is that government seems to have put itself in a weaker position in this deal.
4. Giving a majority stake of 70% to Vodaphone is not a good deal. I personally think that under no circumstances should government sell over 50% stake in GT. It gives too much power to them.
Yes, GT is grossly mismanaged and must be sold but the right things must be done. I find it very worrying when government officials try to push this deal through as quickly as they can simply because they claim we need all the cash to supplement our budget.
Regards,
Charles