Mergers, Acquisitions and Financial Results

Negotiations between Ghana government and the United Arab Emirates-based Kinz Telecom Group, over the sale of 66.34% stake in the second national fixed line operator, Westel have broken down. Kinz Telecom Telecom Group has been unable to come up with the US$250 million bid offer it made.

Two months ago, government began negotiations with the Kinz Telecom Group, prospective buyers of the majority stake in Westel. According to a local report in the Business and Financial Times, Kinz is blaming this on the Government which it says bid the price up to US$250 million. This is a poor excuse as those making bids should only do so if they are able to afford to pay. Westel already had additional liabilities including a US$25 million penalty owed to the regulator NCA for failure to roll out services. And the prospective purchaser would have had to pay US$13.5 million to acquire the promised mobile licence. There is no doubt that at $250 million the company was over-priced.

Early signs that the bid was not going ahead after the signature of the share purchase agreement on 12 April were that the Kinz Telecoms Group management made no effort to visit the company it was buying. The 45 day grace period for payment came and went.

The other mystery is the non-appearance of UEA-based Etisalat who Kinz Telecom Group said were backing the bid. All through the bidding and purchase process there has not been a single word about the transaction on the Etisalat web site and despite several attempts to get an answer from it, the company remains silent on the issue. In a similar transaction in Nigeria – when Transcorp was bidding for Nitel – the company withdrew because the sums being asked were larger than it wanted to put up. Etisalat is also involved as a 40% shareholder in the Kenyan Government’s TEAMS fibre project (see next story) and has just rolled out as the third mobile operator in Egypt.

This is yet another disaster in the long string of setbacks the Ghanaian telecoms privatisation process has suffered in the hands of the Government. Whilst it must have been heartening for the Government to accept the US$250 million bid, it required only fairly rudimentary mathematics to see that the numbers would not add up. Perhaps a speedy second bidding round will achieve a more realistic lower price. Without the successful privatisation of Ghana Telecom, Westel and Voltacom, the country’s potential to grow its ICT sector is likely to remain stymied.