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03.09.2012 Business & Finance

Tigo GM: too much competition in Ghana's telecom industry

By myjoyonline
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The new Tigo Ghana General Manager, Adil El Youssefi thinks there is too much competition in Ghana's telecom industry and that raises concerns of revenue neutralization for profitable telcos and severing of an already bad financial situation for the non-profitable ones.

Youssefi told Adom News in an exclusive interview “competition is good to the extent that it brings the best out of every telco in terms of product innovation, and lower prices for consumers – but sometimes too much of every good thing can be a bad thing.”

“Too much competition will lead to some competitors not making money and at some point it will be a problem for them – and our concern is that almost all of our competitors are not making money and definitely it is not happening for the sixth operator and that can be bad,” he said.

Youssefi has come to Ghana from Chad, where the telecom market is way less competitive compared to Ghana, with Tigo Chad being market leader with barely two million customers, and total mobile penetration of about 32% as at March 2012.

The new Tigo Ghana GM noted that for Ghana's telecom industry to continue to maintain its positions as one of the leading emerging markets, there is the need for operators to be profitable, and in the face of the stiff competition, that could only happen either through innovative products by the operators, or through austerity measures such as operational budget cuts and reduction on capital investments, which then would affect the entire industry adversely.

He noted, however, that high mobile penetration of over 93% is good, because, whereas it creates saturation in the voice market, it also creates opportunities for growth in the areas of data service, product innovation, mobile financial services, and for new services that telcos could give to consumers and enrich their lives and communication experiences.

Tigo is one of two profitable telcos in Ghana; the other being market leader MTN, while the others are either making losses or barely breaking even. Recently, Airtel and Vodafone CEOs admitted in separate forums to not being profitable yet.

Almost all the telcos, including profitable market leader, MTN are undergoing some austerity measures, reflected in heavy budget cuts on branding and staff benefits, downsizing and its resultant staff agitations in some cases, among other things.

Meanwhile, the sixth operator, even though not yet profitable, is fast chipping away market share from the leading operators and threatens to further neutralize their revenues, a concern expressed by telco bosses long before Glo came, and indeed before the new Tigo Ghana GM came in country.

Youssefi said Tigo is also feeling the pinch, but is braving the storm and still remains profitable, in spite of the relatively huge loss in subscribers and market share.

He said the Millicom Group, to which Tigo Ghana belongs, has always maintained a lean staff and lean expenditure in order to be able to meet its obligations to four main focus groups - consumers, employees, shareholders and regulators/communities it operates in, and this had helped to prevent austerity measures even when the entire industry is facing hard times.

“We have never believed in spending for spending sake just to create a buzz about our brand and gain market share for short unsustainable periods – we are here for the long term and so we are building a business that is economically viable for consumers, shareholders, emploeers and the regulators/communities we operate in,” he said.

Youssefi said Tigo's brand positioning is about giving value and the best product to customers and not about spending on sports, entertainment and other areas which may not yield sustainable value to its four main groups.

The Tigo GM said even though Tigo makes profits after tax, it is not shipping millions of dollars out of Ghana as some pundits claim, adding that Tigo has reinvested every pesewa it had made in Ghana over the years back into the Ghana business and has actually brought in more money from shareholders every year into the country.

He explained that “37% of our revenue is going into taxes, over 20% is going into capital expenditure (capex) and the remainder is used as operational expenditure (opex) – that leaves hardly anything to ship out – and in fact we bring in more money from our shareholders because they believe in the long-term profitability of the business when they can then get their money in dividends and higher share value.”

Speaking of shares, Mr. Youssefi said Tigo shares are currently available to Ghanaians on the Stockholm Stock Exchange (SSE), but once Tigo needs money every year for reinvestment, he would not rule out listing on the Ghana Stock Exchange (GSE) sometime in the future, even though that is not being discussed at Tigo yet.

He is confident that in the event of consolidation, Tigo would emerge as one of the strong and surviving brands, saying that Tigo has been in Ghana for 20 years and continues to offer the most innovative, best quality network and most affordable tariffs on the market, which are clear indications that Tigo understands the market better and has bonded with Ghanaians and is here to stay.

Tigo is the third largest operator in Ghana in terms of subscribers, commanding some 3.7 million subscribers representing 15.6% market share as at July 2012.

Story by Ghana/Samuel Nii Narku Dowuona/Adom News

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