Celtel Acquires Ghanaian Operator, Westel, for $120m

Telecoms

The Ministry of Communications has announced the conclusion by the Government of Ghana (GoG) of a sale and purchase agreement with Celtel International, a subsidiary of Kuwaiti company Zain (formerly named MTC) in respect of 75% of the shares of Western Telesystems (Ghana) Limited, (Westel). The GoG through the Ghana National Petroleum Corporation holds the remaining 25%.

Following extensive negotiations, a price offer of US$120 million has been agreed upon for 75% shareholding reducing to 70% within three years when Celtel will release 5% of its shares in addition to those to be released by GoG to be floated on the Ghana Stock Exchange (GSE) to benefit the Ghanaian public.

The offer price of US$120 million includes an additional consideration of US$15 million outright payment to cover the penalty fee of US$25 million due to the National Communications Authority (NCA), an amount which will be paid over the eleven-year period of the licence's lifespan.

Telkom Kenya to Lose Pricing Power as Wireless Sweetheart Deal Ends

The rock bottom calling tariffs that consumers have been enjoying on Telkom Kenya's Wireless service since July last year may soon come to an end, it has emerged. This is because the legal technicality that allowed the national operator to subsidise the tariffs and upset its rivals is about to be removed, leaving it with little option other than upward adjustment of calling costs.

Though initially a fixed line telecoms services provider, Telkom Kenya made a quiet entry into mobile telephony in July last year with the launch of a CDMA backed wireless service in Nairobi.

From Nairobi, this service has over the past 12 months spread to nearly all corners of the country riding on a superior CDMA network built by China's Huwaei Company with a Sh20 billion government-backed Chinese loan.

By the time mobile service providers Safaricom and Celtel realised that Telkom was actually making a foray into their market, the Wireless service had signed up more than 100,000 subscribers onto its network, threatening to force a mass migration with the offer of rock bottom tariffs.

While Safaricom and Celtel subscribers pay Sh12 in average off-peak rates for calls within their tariffs, Telkom Wireless has been charging its subscribers Sh5.50 for all calls within its network.

The two mobile phone companies have argued that Telkom is only able to offer the service because it was spared the burden of paying billions of shillings in licence fees they were charged before being allowed to enter the local market. Safaricom paid Sh3.9 billion for its licence while Celtel's predecessor KenCell paid Sh3.8 billion in licence fees in 2001. Besides, Safaricom and Celtel point to the fact that Telkom has been illegally spared the burden of charging duty on its airtime allowing it to raid their market with cheap tariffs.

But now it has emerged that a Kenya Gazette notice that the Communications Commission of Kenya (CCK) Director General John Waweru published two weeks ago could be the beginning of the end of Telkom's offer of cheap calls on its Wireless network. Waweru says the secret lies in legislation that restricts the levying of value added and excise tax on call tariffs to holders of mobile phone licences.

Since its launch, Telkom has been offering the wireless service using a licence that does not qualify to be charged tax and used the head room to lure consumers with low tariffs. Now Waweru says that with a mobile phone licence, Telkom will qualify to be charged tax - a move that would force it to revisit its tariff structure. "The moment Telkom Kenya gets the licence it will have to pay tax since this is a legal requirement," said Mr Waweru.

Should this happen, Telkom Kenya will have to increase its tariffs up by 26 per cent -after factoring in the 16 per cent as Value Added Tax (VAT) and 10 per cent as excise duty chargeable on mobile phone air tariffs. Such a revision should provide relief to Safaricom and Celtel who have demanded that the CCK levels the playing ground by making Telkom pay for its licence and pay tax on its tariffs.

Waweru says Telkom Kenya has been offering the Wireless service using the Insta Phone licence that allows it to offer wireless telephone services within a restricted area. This Waweru says is a service that the company has been offering for a long time using bigger and cumbersome gadgets that users could not carry around.

Telkom may have its mobile telephone licence as soon as the beginning of December, when the 60 days window given for rivals to lodge complaints against the award ends, signals that the days of Telkom Wireless low call tariffs are numbered.

Business Daily