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Opinions of Wednesday, 9 July 2008

Columnist: Adu-Otu, Yaw Asare

Ghana Telecom Majority Sale to Vodafone:

Potential Threat to National Security of Ghana

The sale of majority shares of Ghana Telecom, GT, to Vodafone will have the potential to diminish the integrity of Ghana’s sovereignty and threaten its national security.

Since taking over power of the state of Ghana in 2001, the New Patriotic Party, NPP, government led by President John Agyekum Kufuor, has not ceased playing political games with the telecommunications sector of the country. The expected sale of GT to the British-based Vodafone is ample testimony that the Kufuor administration is bent on handing over a strategic asset of our country to all-comers, within the circuit of neo-colonization and world imperialism.

When the British government offered recently to pay for the medical bills of pregnant women of Ghana I could not help myself to thinking that there was a string attached; there is no free lunch in the international system. It is commonplace knowledge that in the capitalist world economy nations have tended to pave the way for the profit interest of private corporations in their dealings with the foreign countries they expect to exploit. So, there you have it.

At the time of writing this article, both the government of Ghana which has the controlling authority over GT and Vodafone of Britain had announced versions of completion of negotiation for the latter to acquire 70% majority ownership of Ghana’s leading telecommunications corporate agency of the state. A Reuters’ news report released simultaneously in Ghana’s capital city Accra and London on Thursday July 3, indicated that Vodafone Group had “paid $900 million (454million pounds) for a 70 percent stake in Ghana Telecom, the African country’s third largest mobile phone operator,” yahoo.com news carried the story.

According to the Reuters news story, the agreement signed between the government of Ghana and Vodafone in Accra “still requires approval of the country’s parliament.” In that regard, “Vodafone spokesman Simon Gordon said it was expected” that the parliamentary approval will be “given by the end of the third quarter of 2008.”

When I broach the fear of threat to national security of Ghana in connection with the negotiated GT-Vodafone deal, I have in mind the infamous political episode that ended with swapping some citizens to the United States for the release of former President Jerry Rawlings’ cousin Michael Soussoudis from American prison. The Soussoudis case remains a clear indication as to why and how the integrity of national security of a developing country like Ghana can be compromised easily by the infiltration of foreign intelligence agents for the collection of vital information. Did Ghana learn any useful lesson from the Soussoudis Spy Swap case?

Who knows what could happen to Ghana when foreigners are given unfettered access to the nerve center of the country’s only significant telecommunications superhighway outfit in this day and age of advanced Information and Communications Technology, ICT.

Meanwhile, the leading opposition political party in the parliament of Ghana has issued a statement raising serious questions about the process and content of the reported deal signed between the Ghanaian government and Vodafone. The opposition National Democratic Congress, NDC, questions why the GT-Vodafone deal was for 70% acquisition instead of the advertised 66.77% shares.

In a press statement released July 3, the NDC parliamentary opposition expressed “disappointment at the general lack of openness and transparency in the privatization of the major National asset (GT), which has major National Security and Economic implication[s].” The statement indicated that several telecommunications companies from around the world, including “a local Ghanaian-led consortium,” had expressed interest in GT in October 2006, “when the Government of Ghana begun a process of identifying a strategic investor to acquire between 55% and 65% of the equity of Ghana Telecom (GT) and to take over management of “ it’s operation. In that context, the NDC document posted on http://www.ghanaweb.com, July 3, 2008, stated: “The minority wants to know why Government is exclusively negotiating with only Vodafone plc UK without consideration for other bidders who are likely to offer higher bids than Vodafone, and address the socio-economic needs of the country.”

“In March 2008, overtures were made to Vodafone plc UK seeking an offer. Vodafone’s offer as we were told from Government’s own sources was $960 million with stringent caveats still far below the Minority expectations of $1.5 billion or more for the value of GT (subject to its own internal valuation and audits to be conducted during its due diligence process),” the NDC document stated.

In news reports regarding completion of negotiation with Vodafone, the Kufuor administration invokes rising expectation from the deal, suggesting higher level of efficiency and technical competence in Ghana’s telecommunications industry. While the government’s statement assures Ghanaians of benefits from the GT-Vodafone agreement, it seems to be silent on Vodafone’s profit interest, as if Vodafone were a charitable organization.

Vodafone sees its principal benefits in the GT acquisition deal in terms of “Exposure to the attractive and growing Ghanaian telecommunications market,” in a country with “total population of 24 million with more than 50% under the age of 25” and with “real GDP growth of 6.3% in 2007, contained inflation and a stable political background,” according to a statement on Vodafone’s website (http://www.Vodafone.com), accessed on July 4, 2008. The statement notes also that Ghana has a “low mobile penetration at c.35%, with 2.7 million subscribers added in 2007.” More interestingly, Vodafone notes “significant additional growth prospects from recent oil field discoveries” in Ghana.

A fair question to ask is that given the positive indicators identified by Vodafone and the prospects for growth, what stops Ghanaians themselves from managing operations of GT in order to realize the benefits for the country, as opposed to giving away the hen that is expected to lay golden eggs, so to speak? In the possible answer to this question lies the issue of diminishing sovereignty of Ghana: Why can’t Ghanaians do for themselves what others can do?

In addition to the positive indicators associated with GT mentioned above, Vodafone recognizes it is the third largest mobile telephone player in Ghana “with approximately 17% market share and 1.4 million customers as at 31 March 2008.” In addition, GT is the “leading fixed line and broadband operator with c.99% of the total number of lines and c.90%market share of the retail ADSL market.” Vodafone has noted also that GT had “revenue growth of 9.3% in the 12 months ended 31 December 2007 ….” Again, it is fair for one to ask why would Ghana hand over majority controlling share in a corporate entity that has the market data indicated by Vodafone?

Of course, it is no wonder that Vodafone has recognized the “Substantial turnaround potential” of GT and expects “to invest US$500 million in its operations and network, restoring and expanding network coverage and completing and integrating the fiber backbone.” However, the parliamentary opposition, NDC, has raised its ire with “the inclusion of the National Fiber Optic backbone constructed at the cost of $100 million with a loan from China, which has never been part of Ghana Telecom’s (GT) assets,” in the Vodafone transaction. “We demand to know why this [fiber optic] has been included as part of Ghana Telecom’s assets as the second phase of this ICT infrastructure highway is yet to commence,” NDC’s press statement stressed.

The parliamentary opposition notes also that selection of Vodafone contravenes “A major requirement as was advertised by government for a strategic investor” with “significant fixed wire line operations experience.” As it turns out, “Vodafone is the world’s largest mobile telecommunications group …,” according to the corporation’s statement on its website. In this regard, Ghana’s parliamentary opposition states, “The selection of a mobile only network operator (Vodafone) clearly flaunts the Government of Ghana’s own non negotiable selection [criterion] that states the successful bidder must have significant experience operating Fixed Wire Line telecommunications network with (a minimum of 10 million lines/subscribers).”

In connection with the need for experience in fixed line operation, the parliamentary opposition NDC noted, that “This requirement cannot be met by Vodafone plc UK as it is a wireless mobile network operator and has no real fixed network operations record experience, no unbundled broadband internet experience. As such they may abandon fixed network operations in favor of highly profitable mobile wireless unit unless there are legal safeguards.”

Active Ghanaians may recall that the GT-Vodafone deal is not the first time the Kufuor administration has promised the country one thing and delivered another in the telecommunications sector. In 2002, the Kufuor administration’s Minister of Communications, Felix Owusu-Adjepong (MP, NPP-Akim Swedru) told Ghanaians he was inviting a strategic investor in GT and brought in Telenor Norway which turned out to be an expensive “management consultant.” The Telenor deal took place after politically motivated ousting of Telekom Malaysia orchestrated by Owusu-Adjepong.

Unlike the other opposition political parties in Ghana such as the Convention People’s Party, CPP and PNC that have chickened out of commenting on the GT-Vodafone deal, it is commendable that the NDC has mustered the courage to air its disagreements with portions of the agreement, even though it is not against the sale, per se. Yet, the NDC cannot be looked at as an angel regarding using the state-owned Ghana Telecommunications Ltd, GT, as a political cash cow.

Four months before Ghana’s 2000 general elections, the NDC government, led by ex-President Jerry Rawlings, sold 15% more shares of GT to Telekom Malaysia for which the Asian multi-national paid $100 million in cold cash. (Ref. “Telekom Malaysia to Buy 15% More in Ghana Telecom for $100 Mln,” at www.ghanaweb.com: Business News of Thursday, 17 August 2000. Source: Bloomberg L.P).

Since there was no public accounting of the $100 million paid by Telekom Malaysia, the perception that the NDC administration used that money for its electioneering campaign cannot be challenged. Hence, refusal of the NPP government to renew Telekom Malaysia’s GT contract in 2001 could be considered truly as motivated by political consideration. Of course, this view is not intended to hold brief for Telekom Malaysia whose performance in Ghana left more to be desired.

It is interesting and disturbing also that with the arrival of Telenor Norway management consultant on the Ghanaian telecommunications scene, the Kufuor administration made high-flying pronouncements about potential benefits and raised expectations of Ghanaians similar to what it is doing with the GT-Vodafone deal.

In the process towards hiring Telenor, Felix Owusu-Adjepong promised Ghanaians 400,000 fixed line telephones in short order. Almost seven years to date, GT is short of the 400,000 fixed line telephones. In this regard, why must Ghanaians believe the Kufuor Administration’s promise of high expectations from the GT-Vodafone deal?

Unlike the Telenor arrangement, Vodafone has protected itself with the provisions of United States Securities Exchange Act of 1934. Ghana will incur a hefty price if and when it decides to get out of the GT-Vodafone deal.

Given the degree and intensity of reportage of the GT-Vodafone deal globally, it is clear the whores and vultures of international big business are celebrating a good hunting day on the carcass that the NPP government of Ghana has delivered on a golden parachute.

By: Yaw Adu-Otu

WOODBRIDGE, Virginia; Monday July 7, 2008
The writer is the author of “Ghana, In Search of Illusive Positive Change: A Review of the First Kufuor Administration” (Available Online)
aduasare1@hotmail.com