Broken promises in Ghana's telecom sector

In the decade, ending in December 2006, Ghana’s Telecom liberalization process has gone through a see-saw process of private sector participation in the duopoly sector of fixed line telephony and back to full state-ownership. During this period, two different governments each promised Ghanaians that private sector participation in the duopoly telecom economy will usher in a golden age of democratized access. And yet when the licensed term of each of the so-called ‘strategic investors’ expired, the governments told Ghanaians the contracts would not be renewed because the ‘strategic investor’ failed to deliver.

Examination of the two cases of Telekom Malaysia and Telenor’s (Norway) record in Ghana argues that the failure of the private sector in fixed line telephony lies in the positioning of telecom services as club goods and not public goods. Club goods like ‘gated communities’ in the city promise improved service to members and not improved access to the wider national community.

Taking telephony democratization into the rural regions of the country is an infrastructural rollout issue and, like roads and water provisions, has always been carried out not through market, but through public, or state-led or state protected investment. Thus contemporary civil society engagement with telecom policy should be geared at disarticulating telecom as club goods and re-position them as public goods to meet the network backbone requirements, as was the case in Europe and North America, before competition can be introduced to offer add-on services.

Market failure

The story of how and why the regime of market fundamentalism was advocated for the emerging digital information economy in the global south is a familiar one that needs no rehearsing. What is not clearly articulated is that, despite spectacular growth in absolute terms in connectivity, the private sector has actually failed to deliver on its promise in Ghana.

The following discussion is focused on fixed line phone telephony and not about mobile telephony which accounts for the spectacular growth in teledensity in Ghana. But given the urban bias of mobile telephony, any discussion about accessibility should be about both rural and urban phone access.

Since the liberalization of the telecom sector in Ghana, the country has gone through two governments and Ghana Telecom, the former monopoly, has gone through two foreign private sector controls each with a disastrous conclusion. As at January 2007, Ghana’s two actors in the duopoly telecom sector, GT and WESTEL, both reverted to 100% government ownership after experiments in private-sector participation. But re-possession is not based on a Chavezian nationalization for national re-distribution as is the case in Venezuala. Rather it is a step back to prepare for yet another (a third) attempt at re-privatization.

When the World Bank pushed for Ghana’s liberalization and privatization of telecom it argued that the greatest economic gain for sub-Sahara African countries depended on the introduction of ‘competent commercial management’ into the telecom sector. Its argument was that commercialization had become a priority in the industrialized countries and so developing countries should follow suit. It also pointed out that profitability, productivity and the ability to meet demand should be the criteria for success (Mustafa et.al. 1997, 21).

The idea of demand applied here is effective demand in economic terms, which means the ability to pay from the side of the consumer, determined by the demand and supply curve. It is different from the demand for services as defined by social and political need on which the discourse of development has always been premised and the legitimacy of the post-colonial state founded. The question of humanist gains (in contrast to economic gains) is lost in the vocabulary of the World Bank.

Telekom Malaysia

In 1997 the former state telecom monopoly, Ghana Telecom was partially privatized and a new competitor, WESTEL, a joint government and private sector company, was introduced as the second actor in the new duopoly economy. In both organizations, the private shareholders had management control because of the understanding that this would result in efficient management without governmental intervention.

For each of these two companies, the private sector was labelled as the ‘strategic investor.’ The strategic investor in WESTEL was an American company, Western Wireless. GT’s strategic investor was G-Com Ltd., which outbid companies like AT&T and paid 38 million US dollars for a 30% share of the 127 million dollar Ghana Telecom.

G-Com was a consortium of four companies, with Telekom Malaysia owning 85% shares. The other three were Sulana Electric, a local company 5%, NCS, a local company 5% and Giant International 5%. Such a composition made Telekom Malaysia to be synonymous with G-Com, especially in the Ghanaian media. As part of the contractual agreement between Ghana Government and G-Com, the latter was given management and technical consultancy responsibility over GT.

Despite its dominant 70% ownership, Ghana government gave up the management of GT to the Malaysians. It also had three (while Telekom Malaysia through G-Com had four) representations on the board of directors of GT. By the end of 2000, two of the three Ghanaians on the board resigned without publicly giving reasons. The NDC government strangely did not replace them, and as a result gave the Malaysians a blank cheque over GT; a decision that came to haunt it when it lost elections in December 2000.

When the NPP formed the new government in January 2001, it renegotiated the terms of the composition of the board of directors with the Malaysians and increased government representation to six to reflect its dominant share in GT. In February 2002 on the expiration of the original contract that the previous government signed with the Malaysians, the NPP government refused to renew the contract alleging that Telekom Malaysia had not lived up to its contractual obligation to install 400,000 additional lines by 2002 to the existing 80,000 in 1997. In actual fact, the company could not provide even half of what was required. It provided 160,000 instead of the 400,000 it had promised, falling short by 240,000.

Much of the intellectual foundations of Ghana’s telecom reforms can be traced to the World Bank publication (Mustafa et al 1997) on telecom reforms in sub-Saharan Africa. The main reasons the World Bank report gives for the separation of posts from telecom include that when telecom stands alone, it will be better placed to attract the private sector capital and management. In the Ghanaian experience, Telekom Malaysia, which became the ‘strategic investor’ in Ghana Telecom, through the agency of G-Com and took over its management, actually did not bring in the expected capital.

The Malaysian Managing Director of Ghana Telecom, Dato Abdul Mallek Mohamed, was very emphatic in a newspaper interview in Accra in October 2001 that G-Com, which fronts for Telekom Malaysia, was not required under the contractual agreement of Ghana government to invest in GT. ‘Our role was basically to help out in the development of the industry. Apart from what we paid in equity, no other condition on capital was stated.’1

Meanwhile four years earlier, when the government was trumpeting the World Bank recommendations for separating telecom for privatization, it said the strategic investor would bring in needed cash to invest and expand the telecom infrastructure. ‘The reform policy seeks to strengthen Ghana Telecom through the engagement of a strategic investor to bring into the company finance, infrastructure and management expertise’ the NDPC stated in its national development blueprint (Ghana-Vision 2020 1997, 176).

The Ghana government document that announced the sale process also categorically indicated the attraction of foreign capital as the reason for the sale (Ghana Government 1996). What we now know (after the fact) is that neither G-Com nor Telekom Malaysia brought additional financial investment into the sector apart from the share prices they paid, which was received as government revenue and not financial investment for GT. And the NDC government never faulted the Malaysians on this score.

Telenor’s management and the NPP Government

When the NPP was elected, it clearly made known its intention to launch a policy shift in Telecom, but still under the regulatory regime of private-sector participation. The NPP government decided not to renew the Telekom Malaysia agreement and made it clear it wanted to see the Malaysians leave. The Malaysians agreed to off-load the G-Com 30% shares in Ghana Telekom if their Technical and Management consultancy was not renewed. In July 2002, the government announced a new all-Ghanaian interim management team to takeover the affairs of Ghana Telecom.2

The NPP government had earlier advertised for ‘strategic investors’ to bid for Ghana Telecom. But in the end, the government settled for a management contractor in the form of Telenor Management Partners (TMP) a subsidiary of Telenor, a Norwegian Telecommunication company. The then communications minister, Felix Owusu Adjepong, elaborating on the memorandum of understanding between Ghana government and TMP, said ‘Telenor is required to make available financial resources sufficient to expand the fixed network of GT by a minimum of 400,000 lines within two to three years and bring its management know-how to secure the development of GT.’3

In January 2003, the Ghana government deal with Telenor came into effect and the government told Ghanaians that apart from the 400,000 lines that would be added to the country’s fixed line network, the agreement provided for:

·Extending phone services to all the border towns of the country to help check smuggling.

·Upgrading all existing telecom infrastructure within the first year.

·Extending phone services to all senior secondary schools and teacher training colleges in the country.4

It is interesting to note that the government of Ghana advertised for a ‘strategic investor’ and ended up signing a deal with a management partner, TMP which is not required to bring in financial investment of its own into GT. And for its management stewardship, seven top TMP expatriate Norwegian staff were paid 1.2 million US dollars annually tax-free and an additional 1.8 million dollars in service contracts. Additional benefits included free housing and fuelled cars for each of them for the duration of their term of service in Ghana.5 Such a generous condition of service is reminiscent of officers in the service of Empire during the colonial period.

One would expect that with such unprecedented cuddling and support, Telenor Management Partners would be able to deliver. But at the end of December 2006 the government of Ghana sent them packing for failing to deliver on their promise. In the first place the 400,000 new lines, the extension of phone service to all border towns and as well as schools and colleges that were contained in the agreement were not met. Instead of self examination to clarify why they had not met their contractual obligation, Telenor Management Partners opted for PR and statistical juggling.

First it misinformed the public that it had added 555,000 new fixed lines to the national network. But then TMP sent the true figures to the minister of communication as what they had actually delivered. Thus on December 15, 2006 when the minister of communication, Mike Ocquaye, was briefing parliament of the state of GT and the termination of TMPs management role, he told the house that: ‘From a 2001 fixed line figure of 248,900, as at September 2006 the number had increased to 365,000.’6 This actually worked out to an increase of 116,100 new lines, a miserable shot at the 400,000 it had promised to deliver in return for the obscenely generous package of conditions of service.

Apart from this failed record of performance, Telenor Management Partners, the subsidiary of Norway’s Telenor, during the term of the contract with Ghana acted in a way that can either be described as illegal or a blatant act of corporate malfeasance. As Ghanaian investigative journalist, Alfred Ogbamey, writing for Gye Nyame Concord deftly exposed, Telenor Management Partners, during the term of the contract changed their name to Telecom Management Partners.7 This change was done without ceremony and notice to both the government of Ghana and the public.

It might take further investigation to determine the full implication of such of corporate act of skin-shedding. But the fact that this name change was carried out against a backdrop of a failed and miserable record may speak to a larger picture of corporate impropriety.

These stories of private sector failure do not speak favourably of the wisdom of the World Bank tutelage that privileges the private sector. Much as the telecom sector has now become the hot-cake for investors, what is clear is that investors would not easily go to Ghana to pump in their monies as both the World Bank recommendations and the Ghana Vision 2020 plan sought to create as part of their arguments for privatization. Nicholas Garnham has argued that the telecom sector has a ‘path dependent inertia in the system’ (Garnham 2000, 49) making the exit option a rather difficult one.

Thus foreign telecom investors are not willing to pump capital into the Ghanaian industry because it implies long-term commitment, which they may not be ready to settle for. This is a point the World Bank will not willingly point out in its pontifications about privatization. From this experience, it is obvious that there is policy double-speak in the process of positioning the market as the preferred means of regulating access and inclusion rather than the state.

More so, these woefully inadequate performances testify to the failure of the experiment with private sector-led development in the telecom industry of developing countries. In the World Bank recommendations, the private sector is touted as the magic wand for the telecom problems of developing countries. But as the Ghanaian experience with G-Com/Telekom Malaysia and TMP/Telenor demonstrates, when it comes to fixed line telephony development and administration the private sector is no better than the time tested public or natural monopoly arrangement that has now come under assault.

In the wake of this miserable private sector record, the government of Ghana in February 2007 announced that it has secured a 30 million dollar loan from the government of China to construct a national fibre optic communication backbone (Kufour, 2007). The project will start this year. Why did government wait ten solid years to learn that it is the state’s responsibility to invest in telecom infrastructure and not the private sector which is more interested in the fast cash from the mobile telephony sector?

Notes

1. ‘NDC Sold Ghana Telecom Without Capital Input’ available at: http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=18568

2. Ghanaweb Business News ‘Malaysian Out; 3 Ghanaians to run Telecom’ July 19 2002 http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=25834

3. Ibid.

4. Ghanaweb Business News Govt concludes pact with Telenor January 8, 2003 http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=31285

5. Ghanaweb Business News ‘The Great TELENOR Robbery’ March 10, 2003 http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=33821

6. Ghanaweb Business News ‘GT/TMP Con Exposed’ December 18, 2006 http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=115834

7. Ibid.

References

Garnham, Nicholas (2000) Emancipation, the Media, and Modernity: Arguments about the Media and Social Theory. London: Oxford University Press.

Ghana-Vision 2020 (1997) Ghana-Vision 2020 The First Medium-Term Development Plan (1997-2000) Accra: National Development Planning Commission/Government of Ghana.

Kufour, J. A. (2007) ‘State of the Nation’ presidential address to the Parliament of Ghana. (February 8) Accra: Government of Ghana

Mustafa, Mohammed A, Bruce Laidlaw and Mark Brand (1997) Telecommunication Policies for Sub-Saharan Africa. A World Bank discussion paper No: 353. Washington: World Bank.

Ghana Government (1996) ‘Telecommunications in Ghana: Selection of a strategic investor for Ghana Telecom and the sale of Second National Operating License’ Ministry of Communications, Accra.

Amin Alhassan (PhD) is Assistant Professor of Communication at York University, Toronto, Canada.