Tue, 02 Dec 2003 Feature Article

Telecom Still in Turbulence

By Press
Telecom Still in Turbulence

Accra Mail After a period of turbulence that has seen the change of Ministerial portfolio and reorganization of the board of the National Communications Authority, the telecom sector is ending the year with a critical debate on whether the floodgates of the international gateway be opened or not.

In an industry where premium is not placed on generating original ideas or sustainable infrastructural development, but on 'buying and selling', then the international gateway will be seen as hot cake, to be pursued at all costs by all including the regulator.

The Minister for Communications and Technology is reported to have said that any decision on the International gateway will be taken as a policy decision and not a regulatory one in fact he said cabinet will have the final say.

We at the ADM welcome this piece of news as we see the frequency spectrum and all technologies associated with it as a natural national resource like gold or cocoa, and important decisions in this area cannot be left to an embryonic NCA.

We cannot forget when mobile frequencies which costs millions of dollars to acquire, were given out for nothing in the name of Private sector participation.

The Ghana Telecom/Telecom Malaysia case is still unresolved! A few salient points will now be looked at in detail to make our case on the International Gateway:-

-GOVERNMENT AND PEOPLE OF GHANA:- The cornerstone of the present administration's economic policy is to encourage private sector participation in all development processes.

Paradoxically this same government holds seventy (70%) shares of Ghana Telecom for the people of Ghana. It is no secret that the government has a hand in the acquisition of $150m Chinese's loan (not a grant) for Ghana Telecom to improve its infrastructural development.

Is this loan going to paid back from the consolidated fund? Perhaps the ultimate ain is to get G.T. in full throttle and then privatize it.

BUT WE ARE NOT THERE YET! - GHANA TELECOM'S TARGETS:- Ghana Telecom, particularly under the Telenor Management Partnership agreement has been set some targets, which if achieved will solve fundamental telecommunication problems in this country.

Putting public payphones in villages around the country and charging 200 cedis per min. will be no small achievement compared to doing the same in urban centres and charging about 2000 cedis per min.

NCA officials have been heard quipping that some of their actions against G.T. have been because they have not achieved their targets. The question is: Which targets?

The Telenor one or some previous target? (Why should the new regime which has its targets for not achieving targets which were not set for Them? What are the targets for the other operators, particularly the mobile ones?)

GT AND SPACEFON WAR? The funniest aspect of this debate is when it is reduced to a GT vrs Spacefon war.

Ghana Telecom has been around for sometime and has the largest telecom infrastructure in the country.

It carries the burden of providing the cheapest telephony in the country- the fixed network. Spacefon is relatively young and is specifically into mobile communications (perhaps an overzealous NCA should look at the possibility of licensing Spacefon to offer proper fixed network services, not the ¢2,000/min payphones in Accra) on technical, financial and so many issues, Spacefon and GT are closer than say GT is to NCA.

Spacefon and GT will naturally defend their stand on the international gateway, but this should not be reduced ad absurdum to war between the two companies. We have sought the view of a banker, who wants to remain anonymous.

He states that lenders (banks) and investors do not appreciate sudden and unpredictable changes in the competitive environment as it may negatively affect their investments. The natural reaction is to postpone any decision until the new situation has been assessed.

The time required to complete an analysis may take several months. If indeed Ghana Telecom's financial projections are negatively affected by this move, any potential loan agreement may be in jeopardy.

He further claims that predictable policies from the legislature and the public agencies is a prerequisite for an attractive investment climate. Uncertainties will scare banks and investors from providing finance in markets where policies are unpredictable and short term.

The telecommunication sector seems to be subject to "a trial and error policy", which definitely will attract long-term investments. Ghana Telecom, who has an obligation to extend telephony to all parts of the country, including under serviced and remote areas, is depending on long-term finance to accomplish this huge task.

Moving from the views of the financial sector to a telecom practitioner, we sought to learn why it is so important for Ghana Telecom to retain the revenues from the international traffic. To explain this he started by comparing other African incumbent telecom operators with the situation in Ghana.

The landline telephone tariffs could be kept at a very low level for years because they enjoyed substantial revenues from the international traffic. A few years ago most operators had 50% to 80% of its revenues from international traffic.

This has also been the case with Ghana Telecom. In the recent past the international revenues have drastically reduced. The reduction has been caused by the reduced international revenues have drastically reduced.

The reduction has been caused by the reduced international rates and bypassing of the licensed operators (Ghana Telecom and Westel). To be able to maintain the profitability and to prevent bankruptcy, the revenue loss had to be compensated by an increase of the domestic tariffs.

It appears Ghana Telecom fights to maintain the international revenue level. The stakeholder at the centre of this debate is Mr. Oystein Bjorge, CEO of Ghana Telecom.

He granted an interview to give his views on the issue of international traffic:

Question: Is it fair that GT (and Westel) should monopolise the international traffic or are you afraid of competition?

Answer: GT is not afraid of competition provided that the operators compete on equal terms. It is a fact that GT has special social responsibilities to the Ghanaian public. Such social responsibilities give us disadvantages from a business point of view.

Whereas our competitors can extend their services to the most profitable operation. The more revenues we can get from the international traffic, the faster we can provide telephony to the under serviced areas.

Question: The decision by the NCA to grant Scancom a license to operate an international gateway seem to have shaken GT's management to an extent that you are considering lay offs?

Answer: I believe you are referring to comments from my CFO in The Statesman of Wednesday, which were over amplified by the journalist.

Firs of all; we have yet to see the terms and conditions of the license to Scancom. Such a licence will always entail certain obligations.

To assess the effect on our operations is not possible without such information. In a worst case scenario we would obviously have to look at all options, including a cost reduction programme where downsizing is one of the elements.

Secondly, we are not certain that NCA can issue a licence without the consent of political authorities. We would also like to believe that a decision of this magnitude would not be taken without consulting the other operators in the telecom industry.

Such consultation has not taken place to this date.

Question: Many people have the view that Ghana Telecom is enjoying a monopoly status, which should be removed. The move to allow an international gateway to Scancom and to grant a licence to a third operator is seen as steps in the right direction. What are your comments?

Answer. Ghana Telecom's license provided for an exclusivity period up to 2001. After this period other operators could be grated a license to operate a fixed network. I understand from the media that NCA has opened up for operators to apply for such license.

This shows the intention of NCA to liberalise the market and encourage competition in the fixed network services as well as in the mobile services. I take it for granted that such a license would entail the same terms and conditions, including GT's social responsibilities, as our current license.

I believe it is highly unlikely that a third operator would accept the current framework, under which GT's fixed network services has to work. The domestic fixed network tariffs, which are the only tariffs regulated by NCA, are one of the lowest in Africa.

The current low tariffs do not provide sufficient cash flow to finance a green field operation, i.e. a third operator.

To attract a third operator would require a substantial tariff increase. Ghana Telecom could even benefit if the regulation of the fixed network tariffs were removed allowing the market forces to determine the tariffs.

This is what is happening in the mobile sector where the tariff per minute is more that ten times higher than the fixed network tariffs.

Question: How do you view the future of Ghana Telecom in a more liberalised market, including license to other operators to operate an international gateway?

Answer: As previously stated it is difficult to assess the consequences for Ghana Telecom without knowing the terms and conditions of such license. I am, however, confident, that the NCA and the pertinent political authorities will carefully consider the effects on Ghana Telecom and the telecom industry at large before a final decision is taken.

I do not believe it would be in the interest of the policy makers to jeopardise the future of Ghana Telecom, which is one of the main vehicles to realise the ICT vision of the Government.

The duty of the Management and Board of Directors of Ghana Telecom is to explain the position of GT, which options do we have in given scenarios and inform about the consequences if a certain policy should be decided.

As the major play in the telecom industry we are confident that our views will be taken into account.

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