Communications and Digitalisation Minister, Ursula Owusu-Ekuful
On Friday last week, the latest episode in the seeming soap operatic saga of Ghana’s telecommunications industry took place as the government of Ghana, Bharti Airtel and Millicom International Cellular S.A. announced the execution of the definitive agreement for the transfer of ‘AirtelTigo, the country’s third-largest mobile telecoms network operator to the Government of Ghana, on a going concern basis.
In effect, this will make the Ghanaian government the sole ownership of AirtelTigo, hitherto a joint venture between the Indian Bharti Airtel and the British owned, but Luxemburg domiciled Millicom. The announcement marks the execution of the definitive pact for the transfer of Airtel-Millicom mobile operations to the Government of Ghana.
Under the agreement, the government of Ghana will acquire 100 per cent stake in AirtelTigo along with all customers, assets and liabilities.
“Basis the agreement, the transaction will entail a seamless takeover by Government of Ghana post which AirtelTigo would become and operate as a State entity,” an official filing of the agreement says.
The Joint Venture will be handed to the government, which says it is committed to reviving the company making suitable investments and to operate the company while protecting the interests of the customers, employees and other stakeholders.
Bharti Airtel, in an official statement issued on Friday, said that the transaction would entail “a seamless takeover by the Ghana government, post which, AirtelTigo would become and operate as a state entity”.
According to Ursula Owusu, the Communication Minister, the agreement transfers all customers, assets and agreed liabilities of AirtelTigo to the government.
“We consider this a positive step as it adds to the growing portfolio of digital infrastructure assets being utilised by the government.
“Government will operate this national asset in the best interest of the nation, the company, telecommunications industry, and ensure the protection of the interests of all employees, customers, contractors, suppliers, stakeholders and sustain the digital transformation of Ghana,” she said.
Madam Owusu-Ekuful added, “The telecommunications sector is of strategic importance to the government and it is critical the sector remains healthy, dynamic, vibrant and most importantly, competitive.
“We are determined to make Ghana the digital hub of the subregion and this acquisition is a step in the right direction”.
The Minister signed on behalf of the government while Jatina Catharina Uneken-van de Vreede, Martin P Frechette, Timothy Pennington, Eric Nana Nipah and Vish Ashiagbor signed on behalf of the seller entities.
To be sure this was all expected, the proposed move having been made public by the Communications Minister a couple of months ago during her vetting for a renewal of her tenure as the sector minister by the Parliamentary committee on appointments. Indeed the two companies had informed government of their intention to exit the Ghanaian market in October 2020, and this agreement concludes the extensive negotiations between the parties to ensure a seamless transition and continued operation of AirtelTigo thereafter.
Last October, the Airtel board had cleared the sale of its Ghana joint venture to the government of that African country, and had reportedly taken an impairment charge for the transaction.
On Friday, Airtel said it has “already written-off its investment and provided for in the prior accounts,” which is why, “no further provisions of any material nature are envisaged”.
Millicom is believed to have done the same. Both companies are listed in their respective home stockmarkets although Airtel Tigo itself is not listed on the Ghana Stock Exchange.
The two companies had merged their Ghanaian operations back in 2017. The merger was then approved by the local regulator subject to the condition that Ghana’s government would have the option to buy a stake in the new entity in future.
That clause was inserted following the refusal of the two parties to carry over government’s small minority investment in Airtel Ghana into the merged entity. That minority stake had resulted from the original equity investment made by the state-owned Ghana National Petroleum Corporation in Westel, the corporate entity that eventually evolved into Airtel Ghana.
Airtel had a non-controlling 49.95% stake in AirtelTigo, while the balance 50.05% was held by Millicom. At the time of the merger both partners had been optimistic that it would enable them compete effectively for industry leadership, with AirtelTigo becoming the second largest network provider in Ghana. However, since then, industry leader, MTN Ghana has further increased its market dominance, its overall market share having climbed to some 58 percent.
Instructively this has persuaded the industry regulator, the National Communications Authority, to declare MTN a Significant Market Player (SMP) thus giving it the powers to take regulatory action to curb its market dominance.
Furthermore, Vodafone Ghana, the local subsidiary of the London headquartered Vodacom, which is the biggest telecoms company in the world, has climbed into second place in Ghana.
Airtel had previously said it would look at consolidation opportunities, including an exit, in markets where it is not among the top two players and with this situation in Ghana the sale of its stake in the joint venture had become inevitable.
For its own part, Millicom had seen its dominance in Ghana gradually eroded over the past two decades. Up to the late 1990s, its analogue network, then called Mobitel had been so dominant that it had become the generic name for mobile handsets in Ghana. However, that began to change when Scancom introduced the first GSM digital network in Ghana known then as Spacefon.
Although Millicom converted to a digital network, known as Tigo, to keep up, the dice was cast when South African multinational, MTN acquired Scancom and made heavy new investments in network capacity, brand visibility, marketing and product innovation which put clear daylight between it and its competitors.
The situation was worsened in 2008 when Vodacom acquired the state-owned Ghana Telecom with its nationwide fibre-optic infrastructure and strong popularity in the hinterlands and rebranded it as Vodafone with heavy new investment too.
In an attempt to avoid being left behind, Tigo agreed to merge with Airtel, (which had emerged from Bharti Airtel’s acquisition of the Zain network) creating a joint venture that leapfrogged Vodafone into second place in Ghana but this only postponed the decline of both network operators with regards to market share; MTN continued to pull away from the rest of the industry and Vodafone regained its second place, even over the merged entity.
The decision by the two joint venture partners to exit appears to have justified the NCA’s decision to reel in MTN by classifying it as an SMP.
Simply put they were not making wide enough profit margins to sustain their business because MTN has effectively been pricing its competitors out of the market; this is the situation the NCA is seeking to curb in order to prevent an eventual (near) monopoly situation.
It is unclear what government will do next. While initial expectations were that government was buying Airtel Tigo just to keep it running until an acceptable buyer can be found, statements by the Communications Minister last Friday suggest otherwise; there is now the possibility that government will retain ownership, at least for now, as a strategic move. Indeed, with the strategic importance of the telecoms industry it would make good sense to retain some level of indigenous participation.
For now though what is certain is that Airtel Tigo will continue as a going concern, which means millions of customers will not feel any adverse effects from what could easily have been a debilitating dis-investment that could have reverberated across households and enterprises nationwide.
It said the transaction is subject to the closing of the mutually agreed conditions and Airtel, Millicom along with the Ghana government would expeditiously complete the closing.
In October 2020, Airtel and Millicom announced that they were exiting the Ghanaian market and this agreement concludes the extensive negotiations between the parties to ensure a seamless transition and continued operation of AirtelTigo thereafter.
