GHANAIAN GOVERNMENT SEEKS TO RENEGOTIATE WITH TELEKOM MALAYSIA
7 December 2001
The Ghanaian Government had been discreetly seeking to renegotiate the deal made with Telekom Malaysia by its predecessors to gain some degree of control over the company. Last week it lost patience and went public with those negotiations. News Update looks at the current state of play.
Last Tuesday Ghana’s Minister of Communications and Technology Felix Owusu-Adjapong gave a press conference that laid out in some detail the Government’s discussions with Telekom Malaysia.
The press conference started with the Minister describing the nature of the deal made with the company by the previous Government:"The Government of Ghana, as the sole shareholder of the company as at December 1996, sold 30% of the shares of GT designed as "Class B" shares to a group termed a Strategic investor, G-Com Ltd, a consortium led by Telekom Malaysia to enable GT to become vibrant and viable. The Government of Ghana however retained the remaining 70% shares designed as "Class A" Shares...The Stock Purchase and Sale Agreement signed between the Government of Ghana and G-Com Ltd on February 20, 1997 gave the consortium absolute and unfettered control over GT".
As strategic investor, Telekom Malaysia took full Board control (as might be expected) but did not invest any money in the company (not as you might expect). The latter provides a rather strange definition for the term strategic investor. Not only did it not invest itself but the handover package was sweetened with a loan from the Overseas Economic Cooperation Fund (OECF) and Caisse Francaise De Developpement (CFD) Loan. No dividend has ever been paid and therefore the Government has neither got a working telecoms infrastructure nor the sort of regular hard-currency income other African governments usually expect from a state-owned telco.
As the Minister observed:" Ordinarily, a strategic investor is expected to bring in either working capital or special know how, or both. I leave you to assess whether Telekom Malaysia has brought in specialist personnel. There have been public agitations against the management of GT, for inadequate supply of telephone service". He listed complaints made against the company: long waiting times for new lines, high access charges and poor quality service. The Minister quoted issue 82 of Balancing Act’s News Update in support of his case.
To address this what is widely perceived as a mess, the Government began in February a series of discussions with the company. "On the 5th of July 2001, I met with representatives of Telekom Malaysia with H.E. the High Commissioner Of Malaysia, H.E. Kamarudin Mustafa, in attendance. We had fruitful and cordial discussions which ended up with an understanding that the agreements between the two parties should be re-negotiated to accommodate the following concerns:
- Board composition of GT to be reflective of the equity representation by the shareholders of GT.
- Need for a mechanism to measure performance of the strategic partner that will enable the Government Of Ghana to assess the current arrangement with the strategic partner.
iii. Capital injection by the strategic partners.
- Review of the status of other partners in G-Com.
Both parties agreed these issues should become the Terms of Reference for negotiations between teams appointed by the Government and Telekom Malaysia. According to the Minister, the Chair of Telekom Malaysia sent a letter confirming this arrangement dated July 20, 2001.
Having agreed on three-person negotiating teams, Telekom Malaysia got "lawyered up". It sought to introduce a fourth person described to the Ghana government negotiating team as a legal consultant on Telecommunications based in Australia. Once this had been agreed it then introduced a fifth member, a local lawyer. Telekom Malaysia’s own position quickly became clear. Before it would discuss the Ghana Government’s issues, it wanted it to agree to the following:
- The conclusion of IFC loan of US$100 million for GT.
- The conclusion of Heads of Agreement in respect of the sale of 15% additional shares of GT for which an advance payment of USD 50 million was paid to Ghana.
- The Extension of the Technical and Consultancy Services Agreement.
- Its exclusivity period to be extended.
- The over US$64 million penalty assessed by National Communications Authority against GT be dropped.
The Ghanaian Government maintains that the IFC loan - far from being used for investment - was being used to clear debts that were not declared when the Government approved assignment of GT’s assets in order to obtain the loan. GT’s debts now apparently stand at US$60 million. It argues that Telekom Malaysia is not a strategic investor and the price offered for the shares is below value. Finally its monopoly ends on February 2002 and that it is seeking to extend its monopoly by the "back door". It has failed to provide the 400,000 landlines it promised at the beginning of its contract period.
It has served notice to discontinue its arrangement with the company and the penalties served by the National Communications Authority should be dealt with directly by that body. (At which point it would meet the Minister again in his role as transitional Chair of that body. Something of a conflict of interest.)
The company responds that it has taken the company from 78,000 direct lines to 230,000. It has increased payphones from 480 to 4,000 and will install 10,000 more in the next three years. It also has plans to introduce an ISP and ISDN lines by the end of the year and is introducing cybercafes. Its GSM service has "subscriber capacity of 70,000 but has recently been expanded to cater for a subscriber base for 100,000. ONEtouch (its GSM service) currently covers eight (8) regional capitals and other towns and boasts of being the GSM service in the country with the widest coverage. ONEtouch services will be available in Wa and Bolgatanga by the first quarter of 2002". It says that international calling congestion will be eased when the new offshore submarine cable (capacity: 30,000 voice channels) is completed in June 2002. At the end of its current domestic programme in 2002, it expects the telephone density (number of telephones per 100 people), which stands at 1.25 presently, would be increased to 2.0.
Sadly too many of these promises are in the future tense. Perhaps if it had actually invested in the infrastructure it would have been a different story. Under these circumstances, it is hard to see how Telekom Malaysia can retain its special status after February 2002.