Telecoms generates 10% government income in Ghana

A third party report, which gives deep insights into the contribution of the telecom industry to Ghana’s economy indicates in 2010 alone, telecom operators paid GHC598 million in taxes and levies, representing 10% of government income for that year.

The report from Delta Partners, titled Ghana Telecommunications Market – perspectives on industry, economic and competitiveness, and dated October, 2011, noted that market leader MTN alone paid a whopping GHC415 million, being 6.94% of government income for 2010, and 69.4% of taxes and levies from the telecom industry.

Delta Partners is an internationally acclaimed management advisory and investment firm, which specializes in telecoms, media and technology in mainly emerging and some developed markets.

The study focused on the performance and contribution of Ghana’s telecom industry to the economy from 2010 up to third quarter of2011; but the results are largely applicable in the general sense.

It drew from several international telecom industry and economic reports, national economic reports, such as the Ghana Statistical Service Annual Reports for 2009 and 2010, and some operator and regulator annual reports from Ghana and elsewhere.

The report noted, for instance, that the telecom sector alone represents 7.0% of all investments in Ghana (5.1% from MTN alone) and is responsible for 2.0% of Gross Domestic Product (1.4% from MTN alone), while the sector also takes some 5.3 per cent of the total expenditure of consumers (MTN alone taking 3.6%).

Meanwhile, the report showed that as subscribers increase and mobile penetration goes up, average revenue per user – ARPU - (what telecom operators derive from subscribers) decreased consistently from GHC14.6 a month, when penetration was 50%, to GHC9.4 when penetration rose to 67%.

Currently, mobile penetration is above 80% and ARPU has dropped further to levels where telecom bosses have openly expressed concern that the voice aspect of the business is losing its steam.

The report noted that even though the operational costs of telecom operators keep going up with every passing day, the players keep absorbing inflationary trends on behalf of customers and keep charging lower tariffs, whiles other utility tariffs go up.

In July 2011, for instance, inflation on transport cost was 23.25%, on goods and services – 18.27%; on clothing and footwear – 13.78%; on beverages, narcotics and tobacco – 13.25%; furnishing/household equipment – 13.05%; hotels/cafes and restaurants – 11.91%; health – 8.15%; recreation and culture – 6.32%; housing, water, electricity, gas – 6.15%; food and non-alcoholic beverage – 3.25; education – 2.25% inflations, but for communication, inflation was zero, even though operational cost for telecoms went up.

“The [telecom] industry has been transferring efficiency gains to the customer in clear contrast to other industries in Ghana,” the report said.

The telecom operators, for instance absorbed the communications service tax (talk tax) on behalf of customers, and they also absorb several exorbitant and arbitrary levies and charges by MMDAs on the installation of necessary infrastructure to provide service to communities.

The report indeed noted that mobile communication in Ghana, is one of the lowest in the world, and that has driven economic growth in the country to a large extent.

Ghana has the 15th lowest cost for mobile communication on a list of 50 countries listed in a Nokia TCO (total cost of ownership) study in 2011 – and this included tariffs, taxes, and cost of handset.

Meanwhile the operators also contribute one per cent each of their profits to the Ghana Investment Fund for Electronic Communications (GIFEC) mainly to extend co-located infrastructure to deprived areas.

On the basis of these, telecom operators have been negotiating to get some of the arbitrary levies, fees and charges by MMDAs and some government agencies to be reduced so the operators can rather channel the resources into extending services to deprived areas.

This is in line with a most recent call by International Telecommunications Union (ITU) Secretary-General, Dr. Hamadoun Troure for some of those taxes, levies, fees and charges to be completely abolished to enable telecom operators and the ICT sector to contribute effectively to national development.