It is obvious that Ghana Telecom (GT) has been beset with major corporate governance and management problems since the Telenor Management Partners (TMP) were brought in to manage the affairs of the organization based on information published in the mass media on various occasions. This article looks at the performance of Ghana Telecom under the auspices of TMP since 2002 to the present. Several comparisons are made between Areeba/Spacefon and GT during the same period. The paper concludes with specific recommendations on how the misfortunes of the company can be turned around.
Undoubtedly, in many countries where telecommunications service providers offer world-class services, it is a result of a strong regulator and downright good business practices by the management. The service providers are led by management with the knowledge and their organization?s financial wherewithal to provide the services demanded by their customers. These are prerequisites that enable the industry to flourish. However, in Ghana, a combination of a weak regulator and service providers who are more interested in price gauging than providing high quality service to their customers have hamstrung the development of a robust telecom sector.
Telecommunications services in Ghana are characterized by the following:
? Call completion rates are probably among the worst experienced anywhere in the world
? Large incidence of dropped calls
? Inadequate coverage even in the capital city
? Poor quality of service
The state of affairs at the National Communications Authority (NCA) in Ghana makes provision of telecom services in Ghana every service provider?s dream . As a moribund government entity, the NCA is unable to regulate the service providers. In the consequent void that has prevailed in the industry the service providers operate in the country with impunity. This is exacerbated by the fact that the current head of the NCA has held the position since the NCA was established in the 1990s. Amazingly, the head of the regulatory body charged with setting strategic policy framework and tactical or operational quality of service metrics is still learning on the job! He was appointed by the previous government but the NPP government decided to retain him as Acting Director-General of the NCA over the past 8 years.
While most wireless phone users are extremely unhappy with their service, they appear helpless and are at the mercy of inefficient Mobile service operators in the country. Service providers contribute to this problem by selling more GSM SIM Cards to the public than the capacity available on their networks. This is tantamount to highway robbery, since most callers have to make a minimum of 3-4 calls to get a call through. It also appears that none of the service providers appears to have the technical competency to route calls from congested areas to less congested areas especially in Accra. The services are so bad that those who can afford choose to carry more than one phone at any given time just in case their preferred service provider is unavailable when they have to make or receive an urgent call . This practice causes the service to be more expensive than in most other countries. Despite this deplorable state of affairs within the telecommunications industry in Ghana, it is surprising that none of the service providers have unilaterally adopted a policy of improving the quality of their services and exploit it as a competitive advantage.
Telekom Malaysia (TM) and their local partners purchased 30% of GT in the mid-?90s through a company called G-Com, for a total of $38 million. TM also paid a whopping $50 million to acquire additional 15% of the company between 1998/1999. Over the years, it has been widely reported that each of their three local partners paid $ 1.9 million dollars to acquire a total of 5.0% of the company. However, the NPP government felt that the agreement between The Government of Ghana (GoG) and Telkom G-Com was a terrible deal for the nation so the Kuffour government decided to buy back the shares owed by G-Com. The agreement in question required that G-Com appoint four seats on the seven-member board even though the GoG was the majority shareholder since it owned 70% of the company. This occurred in the year 2004. So as of May 2006, GT is solely owned by the GoG. The tenure of the Malaysians was characterized by the following:
? Almost all contracts being awarded to Malaysian companies
? Switches installed by the Malaysians were of inferior quality and services were poor; for example, call completion rates, fault clearance and service installations were among the worse in Africa.
On Thursday July 18 2002, it was reported by the GNA that GoG and Telenor Management Partners, AS (TMP) had concluded a Memorandum of Understanding (MoU) for the management of Ghana Telecom (GT). The MoU paved the way for TMP to develop a business plan, complete with milestones and success criteria, to secure the development of Ghana Telecom.
In the same period, the Ministry of Communications headed by Mr. Felix Owusu Agyapong, issued a press release about the terms of the Business Plan. The crux of the Business Plan essentially required the GoG engage TMP to:
? Provide a minimum of 400,000 fixed lines within 2 to 3 years;
o Install and extend broadband telephone services to every town with a senior secondary school or teacher training college for Internet and other applications
? Provide GT with management expertise and technical services;
? Improve the quality of service on the existing infrastructure and introduce multi-media applications, including Internet, and e-commerce;
? Develop effective methods to investigate malpractices in the telecommunications sector;
? Develop and implement a human resource strategy for GT; and t ? Extend telephone services to under-serviced areas.
Additionally, TMP was also expected to appoint three executives including the CEO, CFO and a CTO, to run the company. In other words, all the top three positions were filled by consultants from Telenor. However, unlike the Malaysians, TMP was not a shareholder at GT; they did not invest a pesewa in GT.
In a similar speech delivered by the Minister at the end of 2002, he exuded exuberance when he noted that GT?s entry into mobile telecom service ?OneTouch? will soon reach Upper East, and West Regions.
Clearly, the business plan as presented to the press by the then Minister of Communications and copied above, although well-intentioned, was ill-construed since it was riddled with several key errors. For example, the impression was that since TMP was being awarded a management contract, it would be paid based on quantifiable targets. Nevertheless, most of the discrete criteria for evaluating TMP?s performance were conspicuously missing in the terms outlined above and in the contract. Ironically, this was a key reason the Kuffor government outlined in canceling the agreement between the GoG and Telekom Malaysia. In addition, the contract with the Malaysians was annulled because of disproportionate leeway accorded them by the NDC government. Selected GT/Spacefon Financial Results
---- 2001 2002 2003 2004 2005
GT Profit/Loss+ $ 21.0 mill ($12.0m) $11.6m $17.7m $20mill++
Areeba/Spacefon Profit $ 23.0 mill $181.2 mill $ 323 mill
+Conversion Rate: ?10,000=$1.00
++Estimate
On 21st June, 2003, it was reported that GT lost a total of $ 12.0 million in 2002. On Tuesday, August 9, 2005, The Chronicle reported that during the full year that TMP took over the affairs of GT, the company earned a Profit of $11.6 million.. The profit during 2004 was $ 17.7 million..
The Business and Financial Times reported on 8th May, 2006 that Areeba/Spacefon made a profit of US$ 323 million or ? 3 trillion in 2005. The obvious question is why was there such a huge disparity between the two companies in terms of profits? This question is all the more legitimate since GT is the incumbent operator with responsibility for both fixed line and mobile.
TABLE
Although the quality of service offered by all the service providers is extremely poor, Areeba/Spacefon is more profitable than all of the other providers combined.
The Table above was recreated using data from the Ministry of Communications Web site. There were a total of 288,000 lines at GT when the government signed the management contract with TMP in late 2002. Therefore TMP has managed to install a meager 35,000 Lines. Given the abysmal performance by TMP since 2002, it is inconceivable that the government has renewed their contract.
Given all the key advantages enjoyed by GT, it is extremely surprising that OneTouch has always played second fiddle to Areeba/Spacefon. The global trend in telecommunications industry shows that growth in the industry can be attributed to mobile phones followed by data transmission and the Internet. However, in Ghana most of the growth comes from prepaid mobile phone subscription. Unfortunately, prepaid mobile phone is a lot like a mirage. In addition, since mobile telephony has become a commodity business, creative marketing allows service providers to increase their market share immensely.
On Monday, 6th October 2003, Mr. Bjorge, the CEO reported that ?GT had invested a total of $400 million which would increase the number of lines at OneTouch from 100,000 to 750,000 by 2004?. Obviously, this was patently a gross exaggeration of the facts. Although GT may have invested such a large sum in their OneTouch service, their current subscribership is a lot less than 700,000 and beset with technical problems and poor quality of service. GT?s mobile phone service is supposed to be ?1-Touch?, not many-Touches. Since TMP was appointed to manage GT back in November 2002, the company has invested a total of US$ 500 million in the infrastructure as reported by GT?s erstwhile CEO, Oystein Bjorge on 19 April 2005 during an interview given with the Business Chronicle. Therefore, why is the Return on Investment (ROI) so meager at GT or in Ghanaian parlance, ?where did the money go?? The reason for such a huge disparity in GT?s revenue/profit versus Areeba/Spacefon can be attributed to mismanagement by both the GoG and TMP management.
GT has made inroads into data by providing broadband data/voice services in Ghana. The service was launched in 2004 and by the end of 2005, GT had signed up a paltry 900 customers. When the service was launched, the Executives from TMP saw this as a major leap for the company into the future. However, because of poor service and high price of the service, not many customers have signed up. A friend who uses the service at work has informed me that although the BroadBand 4U service has persistently been out of service in his office but at the end of every month he pays full price for the service.
On 17th, November 2005, the Ghanaian Chronicle published a news item under the headline ?Woes of Ghana Telecom Deepens?. Here is an excerpt of the story published by Chronicle:
?In a statement issued by the NCA, the Authority accused GT of being its worst enemy. According to the NCA, the factors responsible for GT?s indebtedness are there for all to see. It said GT sold its minutes at rates lower than agreed interconnect charge. The statement said the company lacked the appropriate systems to collect payments from its subscribers for services rendered. It further blamed the situation on internal fraud and lack of internal managerial systems to mitigate or eliminate those fraudulent practices particularly call termination.?
The above quote is in reference to the ? 203 billion ($20 million) amount that GT owed to Areeba, Kasapa and Mobitel.
As if he intended to run for political office, the previous CEO Mr Borge, was always more concerned about public opinion than facts. Many of his press releases and news conferences contained rhetoric about the competencies of the TMP personnel and their achievements at GT. A case in point was information that he presented to the media and published by the Statesman on 30th, November 2005 that was captioned: ?We saved GT?. In the press release, the CEO exaggerated statistics about GT?s performance since 2003. In this press release he said that,
? More than 50% of all towns with SSS had been connected to telephone facilities
? An ultra modern Call Centre has been established and
? A high speed Broadband Access Technology been introduced.
A prudent question to the CEO would be: Are these the only key accomplishments since your tenure at GT? At the very least, this shows gross dereliction of duty. The CEO did not possess any special skills in management and more importantly telecommunications. His previous experience was operating a cement factory. Although I am not arguing that telecommunications experience is indispensable in a successful telecom management career, the pathetic record and circumstances at GT suggest that perhaps some knowledge of the nuances of telecommunications could only have helped the operational and financial performance of GT. Hopefully the new CEO, Mr. Frode Haugen, is more qualified than the Mr. Bjorge.
On Tuesday, 2nd May 2006, the Dow Jones Newswire announced that, ?In one of the largest takeover deals ever entered into by a South African group, mobile phone company MTN Group said Tuesday it has agreed terms that may lead to a $5.53 billion offer for Investcom, which has mobile phone operations in Africa and the Middle East.? Spacefon/Areeba is largely owed by Investcom. Therefore if this deal is consummated, Areeba will be poised to widen the gap that separates it from GT in terms of profitability and performance even further.
[TABLE]
In additional to the foregoing, several million dollars have been paid as salaries to the TMP Consultants and their Ghanaian partners. Much of this investment was used to purchase equipment for the OneTouch service. In April this year, Mr. Forgen, the new CEO at GT announced that the company had raised US$40 million locally to fund additional projects. Therefore as of mid-May 2006, GT had invested a total of approximately $540 million in the company. However, customers have not experienced any improvement in quality of service. If the company were to perform an audit regarding the use of this investment, the outcome will incontrovertibly be scandalous. It is noteworthy that all these happened under the auspices of Mr. Kan-Dapaah, the now deposed Minister of Communications from 2002 through May 2006.
Just as the Malaysians mismanaged GT, it appears that TMP has made a bad situation even worse. Therefore, my question is why the NPP government has retained the services of an inept management when their contract expired in 2005? While the NPP government was right in buying back the shares of the Malaysians and subsequently annulling their management contract with GT, the current government is making the same mistake made by their predecessor in terms of not evolving a clearly-delineated quality of service (QoS) metrics and ?holding the telecom service providers? feet to the fire? by making them pay penalties for usurping or not meeting the quality standards.
Between 2004 and 2005, GT is reported to have awarded a contract worth $5 million to a local company to supply Personal Computers (PCs) to GT for a period of 5 years. GT did not go through a tendering process to award this contract. This shows lack of transparency by the management at GT. Based on this and other key mishaps by the GT management, it appears that the Board of Directors at GT is either reneging on their responsibilities, decidedly incompetent, does not have the authority to supervise the CEO and the other TMP executives at the company or manifest all of the above three qualities. In this scenario, the principles of good corporate governance are non-existent at the company.
Equally regrettable is the fact that several Executive-, Management- and Board-level positions at GT during the period of the TMP stewardship have been filled with ?insiders? of GT. Disturbingly, this was the previous practice exercised by the management at GT prior to the advent of TMP. This obviously means that GT is unable to benefit from highly qualified Ghanaians many of whom have extensive experience. However, because these Ghanaians in diaspora are not ?connected? to the hallowed executives, they are bypassed and less qualified staff are appointed to these positions. Telecommunications is an area that requires highly competent, technical personnel and seasoned professionals who understand the contemporary and emerging issues including the challenges and opportunities that face both Fixed line and Wireless sectors.
It is obvious from the above analysis that the GoG requires a radical change of attitude in order to turn the fortunes of GT around. The following recommendations are in order;
1. Obviously, the contract between GoG and TMP needs to be reviewed without any delay. Gaps that exist should be plugged in order to allow more appointments by Ghanaians in key positions while holding the Norwegians accountable to GT by virtue of requirements clearly outlined.
2. Less interference by the Minister of Communications. [Hopefully the newly appointed Minister, Professor Mike Oquaye will adhere to this advice]
3. Reconstitute the GT Board to ensure that more competent people are appointed to the Board,
4. The GoG should ensure that the company is privatized without any delay.
In this arrangement, the GoG may choose to remain a substantial shareholder with substantial voting rights. The age-old notion that national telecom firms represent a crown jewel in assets for countries is ill-conceived and should make way for modern-day realism. Due to rapid changes in the telecommunication industry, governments are not well-positioned to preside over the industry?s affairs. Government bureaucracies are inherently lethargic and not nimble enough to leverage the ever-changing technological innovations that have persistently engulfed the industry. This explains why many governments have chosen to privatize their telecom ministries. Hopefully, a new shareholder agreement with the GoG will be better than the previous agreement with Telkom Malaysia. At the very least and as a prelude to privatizing GT,
a. The GoG should consider a breakup of GT, separating OneTouch from GT to become a free standing company since the fixed line business is going through a major transformation, resulting in increased pressures on revenue.
b. Implementing (a) will free up management?s attention to concentrate on the mobile business.
These fundamental changes are required in order to turn GT around to become a modern well-managed telecommunications provider that leads Ghana with innovative products and services. It is only by so doing that telecommunication can become a backbone to the economic transformation of Ghana that invariable culminates in the realization of the country?s vision of accelerated economic development.
Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.
