Ghana Telecom Still Struggling

After years of unimpressive growth, the Ghanaian market is finally starting to live up to its potential, although challenges persist. This month, Ghana Telecom (GT) announced that it had realized a net loss of Cedi 120bn (US$53m), a staggering 67% of its annual revenue. The carrier’s performance provides a glimpse of the mammoth task awaiting the management team of Telenor contracted to turn it around. The odds are stacked against Telenor, but GT’s main problems certainly seem fixable.

Ghana Telecom’s “perfect storm”

• For an operator in a rapidly growing market, Ghana Telecom is certainly struggling. Over the past three years, the carrier has faced a number of challenges that have combined into a “perfect storm” of sorts, negating gains made in fixed network rollout. Voice-over IP and international traffic termination have gotten the most attention, as GT’s international revenue dropped precipitously, by as much as $15-$30m per year. But there are other factors: bad debt, which is estimated to be as high as $40-$45m annually, in addition to bad management, which has hampered efforts to operate more efficiently and competitively.

• GT’s main problems are not insurmountable. To some extent, they are just signs of an operator that has failed to keep up with the times. Telenor’s team of only about seven or eight people may be enough to start fixing management issues and instilling a new culture within the company, although the new management team is facing a considerable amount of suspicion from the carrier’s staff. As for voice-over IP, the new management should force the regulator to come up with a clear decision and react accordingly. Their first step was to plug some of the network holes that allow the bypassing of the fixed network, but this can only be a stopgap if the regulator does not take a clear stand. Indeed, GT needs to get more aggressively into the VoIP game. Finally, bad debt issues can be tightened as well, and with a relatively strong mobile operation (the second largest in the market), GT has a potential growth engine.

• While GT struggles, the mobile market is emerging from its torpor. Last year, mobile operators added about 200,000 new subscribers — the market’s best performance to date — thanks to increased capacity and lower prices. We expect this number to go beyond 200,000 this year, taking the market to about 660,000 subscriptions, driven by factors virtually similar to 2002. For GT, becoming a key player in the mobile game will be another key to survival.