...big test for Telenor ...losing big time to mobile competitors
For economies where the stock market rules, release of company accounts are big events. Good results would normally lead to appreciation of share value and poor results could lead to the suffering of a company.
The scandals that hit US corporate giants in recent times was precisely because they wanted their accounts to look good.
Last Thursday June 18, 2003, Ghana Telecom (GT) released its financial statement for the year 2002. It did not receive much press but it posted a catastrophic loss of ¢120 billion. The pain of announcing these staggering figures fell on the new Norwegian management team from Telenor. Though the accounting date was actually the transition from when the "Malaysian Period" ran into an "Interim Management Committee (ICM) Period" current Managing Director fromTelenor, Mr. Oystein Bjorge had to face the music. He took over in the early part of 2003.
The present shareholding structure makes the people of Ghana and Telecom Malaysia owners in a respective ratio of 7:3.
Ghana Telecom by all standards is a Ghanaian corporate giant and so the staggering loss of C120 billion is big news. Though the average person would not be in a position to read the balance sheet and understand the postings, several reasons have been ascribed to this loss which the new management would have to take on board in its own strategies to resuscitate the ailing corporate giant.
GT has been victim to the new communication technologies, which though convenient to the end user, are also quite destructive to GT which has been suffering reduced revenues from international traffic as a result. Certain companies illegally terminate international calls using voice over internet protocol. A few months ago GT together with the National Communication Authority (NCA) busted a few of the companies engaged in this illegal practice. The new management is in the process of acquiring software and equipment at a cost of $3 million to reduce this illegality.
Payment to other mobile operators is one big area where GT is being milked dry. The imbalance in tariffs makes it cheaper to call from GTs fixed network to other mobile service providers (MSP).
After calculations with data available from GT and other MSPs the following legend presents itself:
A call originating from GTs fixed network and ending in an MSP, say Spacefon costs ¢600.00 per minute. Out of this amount GT takes ¢280.00 and Spacefon takes ¢320.00.
On the other hand a call originating from this particular MSP and ending in the fixed GT network costs between ¢1, 770.00 at the off peak period and about ¢2, 812.00 at the peak period. Out of whatever amount is charged GT is given only ¢240.00 flat and the rest goes to this particular MSP.
Tariffs are another biting area for GT. Investigations reveal that the regulation on fixing tariffs is only applicable to the GTs fixed network while it is a field day for the mobile operators. The rate of ¢600 per minute was fixed since 1996! Using models from the Strategic African Securities to extrapolate the effects of inflation from 1996, the figure today should be about ¢2, 600.00.
The International Telecommunications Union (ITU) recommends that rates from one network to another should be equal, regardless of technology.
The term tariff sends shivers down the spine of any Ghanaian, but in this case upward adjustment of tariffs is most definitely a strategy to be considered by the Telenor management to correct the deep holes in their accounts. For the fixed network, GT has to rely on NCA's good graces for an increase. GT did increase tariffs recently, but was countermanded by NCA and the increases were withdrawn before they reflected in consumers' bills, but with these poor figures staring GT in the face the regulatory bodies would have to act soon, it seems..
Ghana Telecom's financial statement, with the explanations that are adduced are of no comfort to the consumer who wants his or her phone to work without breakups and can also have fast internet connectivity. That is the tall order waiting for Telenor as they plug the holes at GT..