Vodafone Gets the Nod for Ghana Telecom, So Who’s Next?

Telecoms

Vodafone has finally triumphed in its quest to take a majority stake in Ghana Telecom, opening a new chapter in the mobile giant’s expansion plans. In fact, by chasing the deal the company has thrown down the gauntlet and has indicated its readiness to compete for both the big and the not-so-big assets. Emeka Obiodu of Ovum mounts a spirited defence of the global player’s acquisition in Ghana.

“The Ghanaian parliament has finally approved Vodafone’s takeover of 70% of Ghana Telecom, paving the way for the mobile giant’s first foray into West Africa. Remarkably, the approval, after spirited but unsuccessful opposition by some members of the Ghanaian parliament, finally draws the curtain on the era of Arun Sarin as CEO. Vodafone is to pay $900 million for the stake, and has pledged to invest a further $500 million in network infrastructure in the country. In return, the global mobile giant gets Ghana’s incumbent fixed line telco and the country’s third largest mobile operator, Onetouch.”

“For Vodafone, the deal is a major turning point. In recent times, the company has seemingly set its sights on the big global markets where a combination of high growth and a sizeable addressable market can guarantee good returns. It has recently waded into Turkey, China and India, and Ghana hardly matches the same profile.”

“But therein lies the point. As the pool of high-quality acquisition targets lessens, Vodafone is using the Ghana deal to set out its vision for the future and its readiness to compete on the African turf. Indeed, the deal has effectively ended any speculation of a pact between Vodafone and Vodacom on expansion in Sub-Saharan Africa. By entering Ghana, Vodafone has taken its first steps into West Africa, signalling to France Telecom that there is competition at hand.”

“Apart from the geographical significance, the deal effectively plunges Vodafone into Africa’s fixed telecoms market. For a company that, until recently, has traditionally regarded itself as a ‘mobile only’ player, running a fixed network in Africa is not going to be an easy proposition. With the likes of MTN and Zain reluctant to wade into fixed services on the continent, France Telecom had seemed to be the only multinational telco prepared to buy into Africa’s fixed telecoms turf. Vodafone has now followed suit, and by buying an incumbent it will have to grapple with poor fixed infrastructure and political innuendos.”

“In the light of these undertakings, Vodafone must be commended for its boldness in pushing ahead with the deal. Ghana is the ideal test-bed for a push into Sub-Saharan Africa. The country is English-speaking, relatively stable and growing steadily. Vodafone can thus leverage its global expertise and deep pockets to drive growth in the market.”

“Interestingly too, Vodafone has been fairly generous with its offer, although we initially commented on the company’s hastiness in announcing the deal before placating Ghanaian parliamentarians. Quite why the deal is bad for Ghana, as adduced by opponents, is not clear. Vodafone’s offer values the company at $1.3 billion. For that price, it gets to control Ghana Telecom’s 1.4 million mobile customers (about 17% market share), 380,000 fixed line customers and 15,000 broadband clients. Vodafone also said it will take over the Ghanaian government’s fibre networks. In comparison, Nigeria’s Nitel, which operates in a much bigger market, was valued at $1.5 billion when it was sold to a local conglomerate in July 2006.”

Cellular News