CPP Calls Baah-Wiredu’s Bluff

Vodafone-GT Deal: CPP Calls Baah-Wiredu’s Bluff

The Convention People’s Party (CPP) wishes to take up the challenge thrown by the Minister of Economic Finance and Planning, Hon. Kwadwo Baah-Wiredu, for critics of the sale the “GT-Vodafone deal” to “provide alternatives” to salvage the beleaguered company.

We offer the following views and alternatives:

General Economic Policy of the CPP: It is imprudent for the manager of any company or economy to sell off long-term assets to address short-term problems. By so doing, you may survive in the short-term but you compromise your long-term viability and indeed survivability. It is even worse when that sale involves the transfer of majority interests in a strategic asset to a foreign “strategic investors” whose motives and plans remain murky Solution: Stop the sale now. Let’s think through our problems and find solutions to them.

General Ideological Position of the CPP: We remain committed to the belief that “the Black man is capable of managing his own affairs”. Temporary problems in the course of managing our affairs should not form the basis for us to doubt ourselves and give ammunition to our detractors.

(1) Minister’s statement: GT has only $167 million in its accounts and, therefore, an additional $199 million was needed to cater for equipment, advertisements, stationery, fuel, as well as salaries and pensions of its workers.

CPP’s response/alternative (1): There are a number of short-term and long-term measures that Government can take to address GT’s financial situation and improve the quality of its management for now and the future: 1. Recapitalise GT by using part of the US$300 million that government is borrowing to accommodate Vodafone’s unreasonable demands for “debt-free” assets. 2. Prosecute GT management, including the Norwegian management team, for the adverse findings of financial improprieties made against them by the company’s internal auditors. We can recover millions of dollars and invest them in Ghana Telecom. 3. Probe circumstances surrounding the Iroko bond of US$200 million, which places undue restrictions on GT’s ability to invest and to grow. Was there self-dealing in the transactions on the part of management and the board? Could the transaction advisor be held culpable for such an injurious transaction?

4. Depoliticise management of GT and make it transparent, such as compulsory quarterly and annual publication of financial and management reports. Introduce management contracts, complete with targets and penalties for non-performance

5. Purge the GT Board of Directors of political appointees and advertise for potential board members who can demonstrate at properly constituted interview panels that they have the experience and competencies to help shape the vision and operations of GT.

6. We should stop talking only about GT’s gross debt and look at its net debt (which is the gross debt GT owes others minus the debt that others owe GT). This yields a much better picture of the financial health of the company and provides the basis for government to collect all the inter-connectivity arrears and other debts, including those owed by government agencies, for the effective recapitalisation of GT.

7. For the medium-to-long term, do the following:

a. Reform our laws for distressed businesses, whether state- or private-owned, to file for bankruptcy and give them the space to restructure their operations and become viable again without getting sold to predatory “strategic investors”.

b. Reform governance at all state-owned enterprises and open all managerial and board positions to public competition that will unearth the best that this country has for its development.

(2) Minister’s statement: GT's current financial state and the future of the 4,200 workers are endangered; opponents of the GT- Vodafone deal should not hold the workers to ransom.

CPP’s views/alternative (2): The sale of GT to Vodafone will rather endanger the employment of GT’s workers and plunge the Government of Ghana further into the debt. According to Section 4.2 of the Sale and Purchase Agreement (SPA), which was written by Vodafone and simply given to our officials to sign, the government of Ghana should “unconditionally and irrevocably” agree to contribute up to US$40 million for Employment Restructuring Expenditures (i.e., retrenchment). In addition, the SPA says that the “Government of Ghana undertakes to fund GT from time to time for the social costs and other liabilities incurred in connection with the employment restructuring programme of the Enlarged GT Group…” This provision is part of a network of liabilities in the SPA which Vodafone cleverly shifts to the government of Ghana while it preserves for itself all the benefits of the sale, including the right to ship out of Ghana 70.0% of profits with the least amount of investment.

(3) Minister’s Statement: Mr. Baah-Wiredu further explained that even if the $30 million in the National Communication Backbone Company and the $55.5 million in the Volta River Authority's Fibre Optic known as Voltacom, were added to the offers of the other three telecom companies, their offer would not match that of Vodafone.

CPP’s views/alternative (3): This has been one of the most fallacious arguments put forward by the government in the debate over Vodafone and GT. Throughout the debate, government officials have said that the purported valuation was done of Ghana Telecom, and not the Enlarged Ghana Telecom Group, which comprises the following:

1. Ghana Telecom – Fixed Networks (landlines and data) (SAT-3) One Touch exZeed call centre services

2. VRA - Voltacom Subsidiary (Fibre Optic Network)

3. Ministry of Communications’ (National Fibre Optic Backbone)

It is important to note that government is yet to publicly produce evidence of the combined valuation of these important strategic assets whether undertaken by it or its advisors. In its letter of 7th July 2008 to Parliament, the Ministers of Communications and of Finance stated that the enterprise value of US$1,286 million was “implied” from Vodafone’s offer of US$900 million. If there is an objective and non-implied valuation of this Enlarged GT Group, we call upon government to make it public. We humbly submit that an “implied” value should not be used as the basis for disposing of important national assets.

We should also note that by constantly referring to the “$30 million in the National Communication Backbone Company and the $55.5 million in the Volta River Authority's Fibre Optic known as Voltacom”, government is confusing the cost of an investment with its value, and providing further grounds to show why this transaction should not proceed.

If we subject the two fibre optics alone (less GT’s SAT-3) to rigorous social cost-benefit analysis and derive their net present value from the stream of future financial, economic, and social benefits (over, say, 25 years), they could be worth between US$6-10 billion, if not more. Herein lies the strategic value of these fibre optics assets. We make a grievous mistake by confusing its present and long-term value with its cost, or book value.

(4) Minister’s Statement (as quoted by Daily Graphic): “In any case, the minister stated, the government valued Ghana Telecom at ¢ 1.286 billion and it was only Vodafone that offered 70 per cent of that value.”

CPP’s views/alternatives (4) If government “valued Ghana Telecom” alone at GH¢1.286 billion, then again we ask: What is the total value of the Enlarged GT Group, including all its fibre optics assets?

Other issues of interest to the CPP: We have been repeatedly told that Vodafone "will invest US$500 million over five years”, but there appears to be no written commitment anywhere to support this claim. It is significant to note Vodafone’s own non-committal position on the issue as it appears on its website: “Over the next 5 years, Vodafone expects Ghana Telecom to invest over US$500 million in its operations and network, restoring and expanding network coverage and completing and integrating the fibre backbone.” By stating that Ghana Telecom, rather than Vodafone as “strategic investor” creates room for “plausible deniability" in the future, if Ghana Telecom is not able to invest the US$500 million.

Indeed, in the SPA (both the original and the version revised by the government in response to public criticism), there is only one short paragraph dedicated to “Fibre roll-out”. It says: “The Parties recognise the importance to Ghana of the expansion of the fibre backbone and following completion of the Fibre Transfer, confirm that the Parties are committed to the expansion of the fibre backbone by FibreCo within a reasonable timeframe” (emphasis ours). The rest of the agreement is spent proposing ways to maximise Vodafone’s benefits from the deal and shift all the responsibilities and liabilities to the government and people of Ghana.

Unlike the previous agreement with Telekom Malaysia, which had performance benchmarks, timelines and a schedule of penalties for any non-performance, the SPA with Vodafone has no such protections and it saddles the government of Ghana with medium-to-long term liabilities that far outweigh the putative short-term benefits of the US$900 million (even less, once our debt obligation are subtracted).

We conclude by repeating our claim that this deal will be injurious to Ghana and must be abrogated. It’s time we learned to confront, think through and solve our own problems. Fifty-one years of independence imposes that responsibility upon us. Anything short of that means further abandonment of the independence ideal and a movement toward the re-colonisation of Ghana by global corporate interests.

Forward Ever. Backward Never!

Released by: The Communication Directorate, CPP.