Business News of Friday, 1 February 2013

Source: myjoyonline

Telecom sector record lowest inflation rate

Ghana’s Telecom sector recorded an average of 0.4% inflation rate year end December 2012, which was the lowest for all sectors according to the Consumer Price Index (CPI) from Ghana Statistical Service (GSS) ending December 2012.

The country closed the year with 8.8% inflation rate, of which the non-food sector contributed 78.4% and food sector contributed 21.6%. The telecom subsector belongs to the non-food sector, but its contribution to the total inflation from that sector was 0.0% according to the CPI.

Indeed, during the year, the prices of telecom services came down in some case as service providers embarked on several promotions to excite existing customers and to win new customers.

The telcos also continued to absorb some costs such as communication service tax, MNP cost and other ever-increasing operational cost elements on behalf of their customers.

The CPI showed none of the sub-sectors under both food and non-food sectors, recorded anything less than 3.5% inflation rate, but the telecom sector did not even record 0.5% in their tariff increases.

Experts say that may have contributed immensely to the government’s achievement of 8.8% inflation rate, which is just 0.3% shy of the 8.5% target for the year.

But communication sector also constituted only 0.31% of household spending, which was also the lowest in the CPI basket for the period.

A section of the media also reported earlier this year that in the third quarter of the year, Information and Communication (telecoms) was one of two subsectors which contributed negatively to Ghana’s Gross Domestic Product (GDP), the other subsector being Transport and Storage.

Fourth Quarter GDP is yet to be published by the GSS.

Meanwhile, on the CPI, electricity, which constitutes one of the major operational cost elements of the telecoms sector, recorded an inflation rate of 7.7% in December. Electricity is in the same category as other utility services such as water, housing and gas.

Ghanaians have no doubt seen some rough times in telecoms service quality, but so have they suffered with electricity and water, and yet tariffs for those two utilities continue to increase at an increasing rate regularly, while the telecom sector maintains stable tariffs largely due to competition.

Transport topped the non-food sector with an inflation rate of 20.6%; followed by Education with16.5 per cent, and then Alcoholic beverages, tobacco and narcotics (16.5 %).

The CPI also showed that Hotels, cafes and restaurants had an average inflation rate of 8.4% full year, recreation an d culture recorded 10.4%; food and non-alcoholic, 3.9%; clothing, 13.6%; Health, 9.4%; Furniture, household and equipment, 12.7% and Miscellaneous goods and services recorded 14.4%.

The overall average inflation for non-food sector year-on-year was 11.6%, while the food sector recorded some 4.6%, and the combined inflation for food and non-food was 9.2%.

The National Communication Authority (NCA) is glad about the fact that consumers of telecom service continue to enjoy services at affordable rate and it is of the view that that has been made possible because the telecom operators are may be managing their operations more efficiently than the other utility service providers.

But the telcos have for a while now been raising flags about their dwindling profit margins in the face of ever-increasing operational cost.

The Ghana Chamber of Telecommunications and some telco bosses have dared to say in the long-term some telcos could be non-profitable if the current trend continues.

Vodafone Ghana Boss, Kyle Whitehill last year described the non-profitability scare as hysterical saying that all telcos make operational profits and among the biggest corporate taxpayers in country.

But Whitehill also told journalists recently that so far only one telco, MTN, makes profit after tax in Ghana.

It used to be MTN and Tigo which made profit after tax, but according to Whitehill, it is now only one operator. The other telcos, including Vodafone, are either breaking even or are in the red.

Airtel Ghana MD, Philip Sowah also told journalists late last year his company is not yet profitable.