GHANA SPECIAL: CAN IT REALLY SUCCEED AS AN AFRICAN MID-SCALE PLAYER?

EXCLUSIVE INTERVIEW WITH OYSTEIN BJORGE, CHIEF EXECUTIVE OFFICER, GHANA TELECOM

Ghana Telecom’s new Chief Executive Officer Oystein Bjorge provides a frank assessment of the current problems faced by the company and his plans to overcome them in this News Update interview.

How did you get the management contract for Ghana Telecom?

The Government wanted a new partner for Ghana Telecom and went out to tender. Telenor won the tender in early June last year. We didn’t sign a Management Service Agreement at that stage but a Memorandum of Understanding to provide a business plan for the next five years. We said let’s see if you agree with what we’re proposing. On the basis of the business plan, the Management Service Agreement was signed on 16 December last year and I came here on 6 January 2003.

What’s in the agreement?

It’s a three year agreement with an option to renew for another three years. An option to purchase is mentioned. We’re tasked to produce profits. We get a management fee. If we hit certain targets, we get a success fee. There are also certain financial penalties if we fail. The agreement is subject to certain exceptions such as those things that are not in our control like regulatory changes.

Will you be cutting jobs?

In the business plan we said that we would triple or quadruple business volume. Even though we use modern technology, it doesn’t follow that we will cut jobs. We want to cut out some of the "dead wood" and employ new people to replace them. My main concern is not to cut jobs, it’s about things like business ethics and competence.

What’s the business model for the company in a world of falling international revenues?

If you want to finance network extension, you need international traffic. The historical international term rates can’t be sustained. An illegal VOIP traffic has eaten into our revenues.

What’s the value of the revenues you’re losing to the grey market?

Between US$15-25 million a year, ballpark figures. It depends on the rates you apply and the volumes. There are some who have ISP licences who are bypassing us. We have just identified (for the NCA) 32 companies who don’t have licences.

We have applied primitive ways to stop the traffic, restricting ISPs so that they can only download traffic. Nevertheless GT employees have helped them reconnect so it’s not an efficient approach. We’ve ordered a detection system which will enable us to monitor traffic.

Is it possible to identify VOIP traffic?

It’s hard if it’s not in big volumes. If you suspect certain companies, you can set up continuous monitoring.

Is Ghana Telecom the worst telecoms network in Africa?

Probably one of the worst. There’s a whole range of technical problems.

What will it cost to address these problems?

When we did the business plan in just under a month we estimated somewhere between US$400-500 million before we negotiated prices. It’s a guesstimate. We have a fairly good track of the mobile operation in terms of knowing revenues but the fixed line side is much harder to estimate.

So how will you triple or quadruple business volume?

The waiting lists for the fixed networks have 150,000 - 200,000 people on them. Now obviously there’s going to be a lot of errors in those lists but it shows the latent demand. When we open up new switches, people rush in.

On the fixed line side we have a commitment to extend from 250,000 to 700,000 and this will be paid for out of operating revenues. On the mobile side we currently have 100,000 subscribers and we think that there are 200,000 - 250,000 who are ready to buy.

Where will the extra capacity be?

We are committed to doing rural telephony, not just through fixed line but also through GSM. We will connect all regional and district capitals and anything we can pick up along the routes to connect them.

There are a lot of misconceptions about access networks here in Ghana. Everyone is talking about wireless. And there’s even those who talk about fibre. We will do a combination of technologies. GSM will cover the whole country and we’ll use the 2.5 generation that will be compatible with GPRS and therefore offer internet use. We will use ADSL to offer broadband on the copper network and where appropriate. We will select the technology appropriate to the population pattern.

When will you be offering ADSL in Accra?

In 12-18 months. We will also deploy LMDS (point-multipoint) broadband for the corporate market.

You’ve got a share in the SAT3 international fibre cable. How much is that being used?

10-15% of capacity at a guesstimate. Competition in the international market is determining the price level and cable is cheaper than satellite.

What other sources of revenue will you be going after?

We want to increase the payphone capacity to address the low end of the market; for the people who can’t afford "pay-as-you-go" mobiles or fixed lines. We will put in place 5-10 times the current deployment.

When will the experience of using Ghana Telecom change?

There will be gradual improvements. In 3-4 months there will be changes but they will not be very noticeable. You will start seeing significant improvements early next year. This will be achieved through a combination of operating procedures and extending the network.

There is a lot of work to do on the existing network, extending and repairing it. We will have a network maintenance centre. One of our predicaments is that we have 4-5 different types of switches because manufacturers have financed equipment investment. Just by addressing this problem, we can increase capacity. We will ensure that all he switches can communicate with the Network Maintenance Centre so that we can detect faults and issue work orders from a central point.

One of the problems is that Ghana Telecom is not one company but 10. There are 10 administrative regions and it can’t be operated like that. There’s a lot of sub-optimisation.

What are you doing about revenue collection?

We’re getting the so-called Media Mediation system that transfers all data automatically to the billing system. At present, it’s done manually so there’s revenue leakage. We are also going to tighten up IT security, both some of the physical aspects like access to buildings and normal security issues like passwords. Like all African countries, people pinch lines from others and reconnect them.

We have a lot of old debts, part of which are uncollectable. We want to go over as much as possible to prepaid.

What other issues will you be addressing?

Organisational development. We used to be a public company and we have a lot of procedures from that time. We have 12 organisational layers and all benefits and compensation are tied to title. That’s the inheritance. The structure is very rigid. It’s hard to compensate people for what they do rather than length of service. We want to make things more flexible. Training will be an important aspect.

Ghana is the best country in West Africa and they are very nice people but they have the capacity to shoot themselves in the foot, Ghanaians are very international. The diaspora sees what’s happening in the USA and Europe and want to copy it. They forget these markets have networks with 100% coverage and were protected until they reached that point. When it’s built up to that point, you deregulate. You have to cross-subsidise provision in small places for a long time. But a copper network remains the cheapest to operate.

EXCLUSIVE INTERVIEW WITH ALBERT KAN-DAPAAH, MINISTER OF COMMUNICATIONS, GOVERNMENT OF GHANA

Ghana’s Minister of Communications outlines the Government’s commitment to making ICT one of the wealth-creating engines of growth for his country.

When will the phone system improve for business and the average citizen?

The present system is bad so it will take quite a long time. We now have GT and Westel. GT is going through a major procurement exercise that will improve the services provided. We are also talking to the mobile operators (as their services leave much to be desired) about how they ca improve their infrastructure. This is a very critical assignment for me. There is a need to have good infrastructure in place before you can get the benefits of ICT therefore sorting this out is a priority for us.

When will the negotiations over the fine Westel has been given for failing to hit the licence roll-out targets be settled? Without a settlement, it’s not going to invest any more money in Ghana.

The negotiations are going on. Both sides have signalled their position. I am pushing for an early clearance of this case. The fact that you’re fighting with a major player doesn’t help. It’s hard to hold anyone responsible for this state of affairs. We put the players on the field when we didn’t have a proper regulatory regime.

When will the regulatory framework for VOIP be ready?

The NCA is trying to crystallise its thoughts on VOIP. It’s difficult to predict when a decision will be made but they must make their position known to the market. The uncertainty is putting off all investors.

What role is the Kofi Annan Technology Centre going to play?

There is going to be an ICT hub somewhere in the region and we would prefer it to be Ghana. We want it to help train the personal, the human resources we need for our journey into ICT. It will provide the opportunity to gain practical experience. It will offer the middle and top level skills in terms of software development and other areas. It needs to be able to add some value.

What are doing to promote Ghana’s ICT expertise overseas?

Nothing much now. When we launch the national ICT policy in June, there will be a planned programme of activities to sell our ICT activities to the world.

What are you doing about removing the range of obstacles that face those investing from overseas?

We need a good regulatory environment where we can hold GT responsible for delays,

How will you work with Ghana’s ICT industry?

There has been frustration because there’s no clear direction. Things are not co-ordinated. We were unable to offer central direction. The new ICT policy will provide a clear vision supported by an implementation plan. I’m going to do a lot of consultation. I’ve always believed in that. I don’t think we can have the luxury of going wrong. We’re probably late already. It will be difficult even with good plans because plans are only good when you have the financial resources to back them.

So where will the resources come from to support the plan?

That won’t be a problem for two reasons. Firstly it has the President’s own commitment. Secondly we’re hoping to rely on the private sector for the majority of the funding.

But how much will the public sector put in?

I’ve no immediate sense of how much or for what. We’ll know when the ICT policy implementation plan is in place. We will make some contribution to the process. The speed with which the Kofi Annan Technology Centre came together gives you some idea of what we can do. The construction work has been funded by the Government.

What’s your vision for what Ghana will be like in ICT terms in five to ten years time?

It’s difficult to compare a place like Ghana to India. In the next few years I’d like to see Ghana be considered a middle league ICT player in Africa.

I have been given this specific ICT assignment. The President has said that in terms of wealth creation and job creation that ICT will be a major engine of growth. I am here to provide the necessary leadership and direction to enable Ghana to reach that level at the quickest speed and to act to overcome the barriers to achieving it.

I hope to achieve this in genuine partnership with the private sector to enable them to carry out their activities. The fastest way to get things done is to allow it to provide for itself. ICT is an enabler and we see ourselves as an enabler for the private sector.

What incentives are in place for foreign investors?

The Investment Centre has some interesting incentives. We’re also starting discussions to see how we can support ICT in particular. Active discussions are currently under way.

GHANA VOIP FRAMEWORK: NCA IN A DITHER OVER THE WAY FORWARD

Ghana’s regulator, the National Communications Authority is beginning to find its feet. It has recently had a new Chair appointed (see People below), freeing it from the grip of direct Government control. Apparently the outgoing Communications Minister (who was the then Chair of the NCA) put a paper to the Board of the the NCA suggesting that only one VOIP licence be granted. It was rejected by the NCA Board. With the Government as owner of Ghana Telecom no longer as Chair, it is loudly declaring to all who will listen that "the NCA has not been set up to be a friend to Ghana Telecom".

Nevertheless it is having some difficulty reaching a speedy and agreed position on the VOIP issue. In formal terms a paper has gone to the NCA board and it will decide on the issue in the coming months. However it is clear that there is a major debate going on between those who wish to see the market opened up (with certain safeguards) and those who are still anxious to protect the Government-owned incumbent from any serious or for that matter legal competition. With Ghana Telecom itself estimating its losses to "illegal" VOIP traffic at between US$15-25 million, it is quite clear that the company is already getting a run for its money. And the competition is not always coming from where you’d expect it: at least one mobile operator is carrying a lot of VOIP traffic and Westel’s licensed international gateway is doing good business.

Bernard Forson, Deputy Director of the NCA provided an insight into the regulators thinking at a meeting of cyber-café operators at Busy Internet: "The best the Government can do is create an enabling environment. It can’t pay for the infrastructure...We want to ensure therefore that there is a vibrant backbone." He said that he wanted to "walk you through our thinking, especially on VOIP." The thought processes he went through seemed to indicate that he favoured more international gateways provided those involved made a contribution to modernising the infrastructure. Roughly translated, new gateways would need to make investment commitments and would also probably find that GT was allowed to charge more on the interconnect rates.

He was also clear that "there must be interconnect agreements between value service providers." GT is already challenging the interconnect rates and trying to raise them so that it can create a business model that deals with both greater competition and falling international rates. But according to one source close to the regulator: "The NCA wants to try and get a wider consensus and not go straight in with the big stick."

His most controversial pronouncement in a lively evening of debate was to compare illegal VOIP operators to cocaine dealers: both provided employment and opportunities but it didn’t make either desirable. The recent crackdown on VOIP operators uncovered an unlicensed ISP who had simply used another ISP’s licence papers to get lines from GT. A terrier-like overseas journalist amongst the audience got him to admit that with the passing of the duopoly that there were now no longer any rules and therefore it was hard to say that companies doing VOIP were breaking the rules. The NCA will have to move fast to fill this regulatory vacuum. Under questioning Forson said that a decision would be reached by the third quarter of this year. This is not exactly a speedy timetable given how many months have already gone by since the passing of the international duopoly.

SONATEL SIGNS INTERCONNECT AGREEMENT WITH SONATEL

Gateway Communications has signed an interconnection agreement with Sonatel, the national phone company of Senegal, to terminate international telephone calls in Senegal and to provide Sonatel with low cost international calling services. Gateway Communications is the largest wholesale carrier focused exclusively on providing international services in Africa and the Middle East.

The wholesale voice service will allow Sonatel to increase revenue by working with Gateway Communications to prevent telephone calls entering the country illegally and by targeting traditional and non-traditional sources of traffic such as the international calling-card market. The service will also lower the cost of outbound calls to key international destinations, such as European mobile networks, through Gateway’s targeted route management product. The agreement provides Sonatel with access to Gateway’s established network across Africa for termination and origination of telephone calls.

Gateway Communications will install equipment at Sonatel’s international switching centre and utilize dedicated satellite capacity to ensure that Gateway’s customers and Sonatel’s subscribers are provided with optimum quality of service. As a result Gateway is able to deliver the cost-savings of Voice over IP technology but with the quality of a traditional telephone network.

According to Papa Gana Mbengue, Head of International Relations at Sonatel "We believe that this agreement enables us to provide our customers in Senegal with world class voice services and continue to build our country’s reputation as a leading African centre for commerce and industry."

ECOBAND NOW SELLING ACROSS WEST AFRICA

Connectivity solutions provider Ecoband.net is now selling across Africa and acting as agents for RAD and Ceragon Networks, as well as IP Planet. Recent clients include: Africanus (in both Congo and Ghana), Busy Internet in Accra, FirstNet in Benin, Millicom (Ghana), Netcom (Togo), Sobiex Informatique (Benin), Third Rail (Ghana), Togo Telecom and Ghana’s Volta River Authority.

So what’s changed in connectivity terms in Ghana? According to Ecoband’s Alex Sulzberger:"The new SAT 3 connection. At least three people have signed up for an E1 and everybody is screaming for it". An E1 from Ghana Telecom using the new SAT3 capacity costs US$15,000 a month, approximately 60% of what it costs to buy equivalent satellite bandwidth. Ghana Telecom is responsible for the Accra-Lisbon section and that piece costs US$12,000 of the the total price, the balance being international costs. Customers are pleased that this new bandwidth option is available but are complaining at the time it takes to get it installed. As one put it:"GT is too bureaucratic and I doubt that will change with the new management." Prices have already fallen so the early-adopters, as always, may not get the best deals.

Ecoband’s Sulzberger also predicts that there will be a consolidation in the ISP market as has happened in several other African countries. The days of easy entry into the market are over. New entrants would need long pockets to make a success of it and all those we spoke to say that there is precious little new growth.

IN BRIEF

- It currently costs 1.3 million cedis to bribe a Ghana Telecom engineer to put in your new telephone line in a reasonably short period of time.

- Apparently Ghana’s regulator, the NCA got to know about the four companies not registered as ISPs who were doing VOIP through a disgruntled, sacked employee from one of the companies.

- Ghana Telecom is in dispute with one of its VOIP services suppliers.

- Ghana’s Third Rail has been experiencing cash flow problems and there is talk of a management buy-out. At least one company has also been in discussions about buying it.

- Teleaccess (Pvt) Ltd is likely to miss its June 1 launch deadline as it has not set up sufficient infrastructure to start operations, the Zimbabwe Independent heard this week.

GHANA CYBER-CAFÉ OWNERS SPEAK OUT AGAINST UNFAIR AND ARBITRARY AMA TAXES

In a packed meeting of cyber-café owners at Busy Internet attended by well over 100 people, the spokesperson for the Cyber Café Owners Association of Ghana told those attending that café owners were "overburdened and overtaxed and were charging peanuts for their services." He also said that 3 months ago Accra Metropolitan Authority, the capital’s local authority, decided to impose an additional tax on companies with over 10 computers. The tax imposed was subject to no consultation and was completely arbitrary. Those who paid attention in history lessons will remember that the UK government used to tax people on the basis of the number of windows their houses possessed. As the Cyber Café Owners spokesperson told the meeting: "I was paying more in taxes than I was making in a month."

Some of those subject to the tax took the AMA to Court and were able to file a restraining order on the AMA but the decision has been reversed. The Cyber-Café Owners pledged themselves to join any new legal action action against the AMA.

The meeting heard from Balancing Act’s Russell Southwood how the Cyber-Café Owners of Kenya (CCOAK) had joined with the local ISP association TESPOK to lobby the Government to open up international connectivity for ISPs to greater competition. It also heard how CCOAK were: organising training events for members; seeking to raise standards of customer care and were lobbying the government for greater computer education and access.

E-SHOP AFRICA GROWS RAPIDLY AFTER MEDIA COVERAGE

The idea that there’s a market out there for African e-commerce sites if only you can get to them seems to be confirmed by e-Shop Africa’s recent experience. Following an article on the BBC Online News web site (which led to coverage elsewhere), the company has experienced a rush of orders from places as far apart as Scandinavia and Canada: turnover is currently around US$4000 a month.

Being an e-commerce site operator in Africa is not for the faint-hearted. Payments are hard to facilitate and fraud is an ever-present problem (see next issue for full story) Payment usually take two forms: by credit card on the site itself for regular, predictable items and by bank transfer when things are more complicated. According to e-Shop Africa’s Cordelia Salter-Nour: "We don’t hold stock but send out the orders to our artisans who are very good at completing to a deadline. We tell the customer whether we can fulfil immediately or how long it will take to complete and ask them whether we can add the shipping costs rather than simply adding it on. Then we process the credit card and ship."

There are small silver linings. Whereas it costs US$13.50 per kilo to the States from Ghana, the same journey per kilo costs US$50 from Italy. Air freight rates have apparently come down dramatically this year. Where shipments are charged by volume, it can produce a situation where shipping costs twice the price of the item itself. For example a Djembe drum costs US$60 on the company’s web site but US$120 to ship to the States. But says Salter-Nour:"It still works out cheaper than the US$3-400 that retail outlets charge in the US."

UNISWITH LAUNCHES INTO ZIMBABWE’S E-PAYMENT SPACE

The recent problems experienced by the Zimbabwean public in accessing cash has offered a new player in the electronic payments sector a good moment to launch. uniswitch, a newly founded company is the first non financial institution to enter into the business of facilitating payments using credit or debit cards.

Started in late 2002, uniswitch will open its doors to the public in the third quarter of this year. The company will among other things offer "any bank" automated teller machines (ATMs), Point of Sales terminals (POS) in supermarkets and service stations, bill payment services and telephone banking in the near future.

"It is a totally new concept that will put us in line with international trends", Patrick Chakauya, uniswitch’s Marketing Director said. "The Œany bank’ facilities that we will be offering are a major step towards real convenience in electronic banking" Through this concept, members of the public holding any credit or debit card issued by a bank can transact at uniswitch terminals.

"We see future developments coming in the area of Internet banking, Mobile banking as well as cheque verification and cheque electronification at the point of sale" added Chakauya. The net result of these developments is going to be more convinince for the consumer, less hassles for the retailers and less paperwork for the financial institutions.

While uniswitch has set its entry point into the market through the financial services sector, their mission is to become the largest acquirer of electronic transactions, opening up the door to other areas in which cards are or are going to be in use such as medical aid confirmations.

TANZANIAN ISPS MOVE CLOSER TO ESTABLISHING AN INTERNET EXCHANGE

Independent research has shown that African Internet Service Providers (ISPs) loose over US$400 million every year paying for the peering of local traffic in international exchanges and international bandwidth providers. This was said by Brian Longwe, General Manager of AfrISPA, a membership organization of African ISPs, when conducting a joint technical workshop and a CEO briefing for Tanzania’s ISPs in Dar es Salaam, writes Harry Hare.

The workshop, organized by the Tanzania ISP Association (TISPA) and managed by AITEC Tanzania over 23-25 April, was meant to sensitise the Tanzanian ISP community on the benefits and technology behind Internet Exchange Points (IXPs). An IXP interconnects ISPs in a region or country, allowing them to exchange domestic Internet traffic locally without having to send that data across multiple international hops to reach its destination.

Twenty-two network engineers and administrators from nine ISPs attended the two-day technical training, while 20 CEOs and senior ISP managers attend the CEO briefing on 25 April. The technical training hosted at the University Computing Centre covered both theory and practical exercises on network management and interconnectivity at a local Internet exchange level.

Addressing the participants, Suhail Sheriff, the Vice-Chairman of TISPA, said Tanzania is yet to be part of the Internet and that Tanzanian ISPs are merely subscribers to international companies offering Internet services. "Fortunately, a group of ISPs have come together to from an association that will precisely address such issues and work to further the spirit of the Internet in Tanzania," Sheriff said.

"TISPA has embarked on setting up the Tanzania Internet Exchange (TIX), the basis of which is simple ­ to keep local information local. The exchange will connect ISPs and information destined for each other will be routed more directly through the TIX," Sheriff continued. By exchanging local traffic locally, ISPs are expected to reduce the significant network latency due to the multiple satellite hops and, therefore, improve the quality of service and reduce costs. The exchange will also "encourage more Tanzanian ownership of the Internet, increased productivity based on the use of the Internet and create a more efficient medium of getting and sharing useful information with fellow Tanzanians and the wider audience," he continued.

Currently ISPs have to send all outbound traffic through their international links, most commonly satellite and occasionally submarine fibre. Meaning an e-mail sent from one customer in office 102 belonging to ISP A to his colleague in office 103 but with ISP B, is routed through satellite hops and via at least two gateways and several exchange points before reaching its destination, less than 20 metres from origin.