MIGA Insures Investment in Scancom

The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, announced today its decision to guarantee a $110 million equity investment into Scancom Ltd. of Ghana by Investcom Holding S.A. of Luxembourg.

The guarantee—which covers the equity investment in the form of future retained earnings—will provide coverage for a period of up to 15 years against the risks of transfer restriction, expropriation, and war and civil disturbance.

The project consists of the expansion and upgrade of Scancom's network in Ghana, with the goal of increasing population coverage and alleviating network congestion. The project also entails the payment of a new $22.5 million 15-year license, designed to replace an authorization letter issued in 1994 with no clear frequency allocation or duration.

Scancom, which launched services in 1996, operates a nationwide mobile phone network using GSM technology. Under the brand name Spacefon, the company has become the leading mobile provider in Ghana, with coverage in all major cities, a 65 percent market share, and approximately 955,000 subscribers as of end-2004. The new investment is designed to increase capacity from nearly 1 million subscribers today to 2.7 million subscribers by end-2006, while population coverage is expected to increase from 50 percent today to 70 percent during the same period.

” Ghana's fixed-line infrastructure remains poor and overall access to phone services is still low by most measures, especially in rural areas,” says Philippe Valahu, MIGA's head of Infrastructure. “Although mobile market penetration has increased to nearly 4 percent over the past few years, this low rate highlights the critical and urgent need for investment in telephone capacity and coverage.”

The project is expected to have several direct development impacts. Scancom's expansion will fuel an increasingly competitive mobile market in Ghana. All major operators have plans for investments in networks and aggressive marketing, which should lead to wider coverage and more affordable rates. Mobile penetration is expected to double over the next three years.

Increased coverage will also facilitate small business development, as entrepreneurs gain access to a critical communications medium.

Scancom employs 644 people directly and plans to boost its workforce to 1,377 employees by the end of 2009. The company offers good training programs, career development and salaries, creating opportunities for skilled workers and young graduates. This counterbalances the flight of skilled and educated workers from the country.

The International Finance Corporation is providing a $40 million loan to Scancom to support this project.