GHANA AND UGANDA - PUSHING THE BOUNDARIES OF AFRICAN TELCO PRIVATISATION
22 February 2002
Two developments this week have illustrated the gathering pace of telecoms privatisation. The Ghanaian government has agreed to sell off its majority share in Ghana Telecom and appears to be opening its market to further competition. In Uganda the government is prepared to amend existing licences if the country’s economy finds itself at a competitive disadvantage in the new world digital economy. This top story concludes with a short review of what African governments have signed up to in terms of privatisation with the World Trade Organisation.
The long awaited statement on the future of Ghana Telecom and the Government’s competition policy came in a press conference in Accra last week. The Minister of Communications and Technology, Felix Owusu-Adjepong prefaced his statement by saying:"I wish to take this opportunity to throw more light on the status of reforms being contemplated within the Telecoms sector and the various actions Government is taking in furtherance of its programme to rapidly transform the industry".
He told the assembled media that the Government had had several meetings with the Chair and other leading members of Telekom Malyasia and that these had culminated in a final meeting with Ghana’s President. Following these meetings the Government has reached a number of momentous decisions which are in the Minister’s own words:
- Exclusivity in Telephony in Ghana is deemed to have come to an end as at the close of work on the 19th February 2002. This means that Government will encourage fair competition in the Telecom sector. What is required therefore, is for a potential operator to secure a licence from the National Communications Authority (NCA) to be able to operate.
- Government has agreed with Telekom Malaysia on the re-composition of the Board of GT in the ratio of six (6) members representing the Government of Ghana to three (3) members representing Telekom Malaysia ™. Kindly note that this new composition is a proposal by TM which has been accepted by Government of Ghana since it satisfies the principle that the majority shareholder should hold majority representation on the Board.
- The Technical and Consultancy Services Agreement, which expired on 19th February 2002, is not being renewed. However, to enable a smooth transition to whatever Body would provide Technical and Consultancy Services to GT, Government is granting a three-month stay to TM. Any such future Management Contract shall have the following ingredients:
It shall be governed by terms and conditions that will enhance accountability and performance.
For all management positions, the professional qualifications and technical expertise of the personnel concerned shall also be enshrined in the Management Contract.
Having spelled out these decisions, the Minister then turned his attention to what the Government is now looking for from new investors in the telecoms sector in Ghana and as a consequence for the sale of its majority shareholding in Ghana Telecom:
"Would-be investors should be in a position to bring in resources sufficient to develop the minimum of 400,000 fixed lines so that the President’s vision of extending telephone service to every town with a Senior Secondary School or Teacher Training College can be realised within 2 or 3 years. A fixed line in our context, is any technology which allows one to make a telephone connection to the computer so that not only voice, but data, the internet, video conferencing and other applications could be transmitted at competitive tariff".
"The investor should prove to the satisfaction of us all that it possesses the requisite know-how to deliver our needs adequately. The investor should be in a position to pay a fair and reasonable price for a portion of Government of Ghana shares in GT that would be offered for sale".
The Minister was at pains to ensure his audience that although widening telephone access was an important goal, the quality of service was of equal importance. He was therefore going to strengthen the regulator, the NCA to ensure it was able to oversee the process.
Whilst the statement is welcome news for Ghanaians who have struggled with their phone system, a number of questions inevitably follow: will an investor step forward who will want to buy Ghana Telecom? Will a third player enter what is currently not an enormous market? We await further developments with interest.
UGANDA SEEKS TO PUT CURRENT LICENCEES UNDER PRICE PRESSURE FOR CERTAIN SERVICES
In issue 96, we carried a story from Uganda’s newspaper The Monitor suggesting that President Museveni had directed Prime Minister Apollo Nsibambi to cancel the monopoly agreements held by MTN Uganda Ltd and UTL over international voice-over traffic, to pave way for his attempt to attract new investors in internet-based professional services.
The response by Communications Minister John Nasasira casts new light on how the Ugandan government is seeking to "stretch the envelope" of competition. Firstly he pointed out that the President does not have the power to cancel the licences: they are held for 20 years and with exclusivity period of five years for certain specific services.
What the President’s letter was actually referring to was Offshore Data Processing and Call Centre Services According to the Minister:"What he was actually was that if going through these two companies makes Uganda uncompetitive because of the cost of bandwidth and its inadequate capacity, then the Government should give the option to the companies that may wish to invest in Offshore Data Processing and Call Centres the right to install their own infrastructure for only those operations but not involving themselves in the telephone and other services that are already licenced to the current companioes of MTN, UTL and Celtel." Apparently the President believes that if this means a change of law is needed, it should be made so that Uganda does not lose this commercial opportunity that will bring jobs and employment.
The cause of this shift has been a UNDP-funded study on how Uganda can benefit from e-business. The Minister also corrected what The Monitor had reported him as saying at a stakeholders’ meeting on the report" In my speech I did not say that the Government is not reviewing these licences. I said the opposite. I advised the telephone companies not to see their current licences as "cast in stone" but should be prepared to discuss with the government for their review should changes in technology demand it, as in the case of Offshore Data Processing and Call Centres."
This statement clearly throws down the gauntlet to the existing companies: either invest in being able to handle this kind of work or we will slice portions off your licence revenues.
THE BIGGER PICTURE - WHAT AFRICAN COUNTRIES HAVE SIGNED UP TO
Almost all African countries have signed up to the World Trade Organisation’s 1994 General Agreement on Trade in Services (GATS) that covers basic telecommunications services. The exceptions are: Algeria, Eritrea, Ethiopia, Liberia, Libya, Seychelles, Somalia and Sudan.
It now covers 90% of world telecommunications markets (whether in terms of revenue, investment or traffic). On the basis of this agreement, each country will therefore have signed what is known as the "Fourth Protocol" laying out specific commitments to opening up markets in a document known as "the schedule". Some have agreed to complete competition, while others have opted for limited competition in mobile and data markets.
But it is not easy to sustain the position of allowing a little competition in connectivity markets. A little inevitably leads to more competition. Customers in African countries have clamoured for what are usually cheaper competing services. The fact that mobile subscribers exceed their landline equivalents shows the success of opening up markets to competition. And small openings are building a steadily growing pressure in African countries for greater competition in other areas. Yes, there are dangers as with everything but the greatest danger is simply conducting a slow-paced retreat as the value drains out of the incumbent telco.
Coming soon: What the incumbent telcos need to do in order to survive