Vodfaone Ghana: a missing piece of the puzzle...
Vodafone is not the first operator to discover that the telecoms market in Ghana is more complicated than it looks at first sight. The story illustrates exactly what can go wrong - and right - in African markets.
Ghana is a puzzle in itself. It was one of the first nations in Africa to adopt a positive approach to all aspects of ICT, pushing deregulation and increased free-market competition even in the mid-1990s. It was the first sub-Saharan country to launch mobile telecoms in 1992, just ahead of South Africa.
As a market, Ghana has always appeared to be ripe for expansion and to offer great potential. The actual history of its development has not followed on these expectations closely, although the story is far from over.
Vodafone entered the market in Ghana as part of the privatisation process. Ghana Telecom was the incumbent national operator and Vodafone acquired a 70 percent stake (the remainder still held by the government) in 2008. The operation was rebranded in 2009 as Vodafone Ghana.
This certainly looked like a good deal. Other companies had competed unsuccessfully for the purchase, the main contender being France Telecom, and commentaries at the time focused on the 'bargain' price of around USD900 million that was agreed. It was also noted that the intention of the government, as signalled by the regulator (Ghana?s NCA), was to improve service delivery for customers.
This was a key issue. Despite an early launch of mobile services, there was an established and probably valid perception that service delivery was unacceptably poor.
As is typically the case in Africa, the mobile market in Ghana also vastly outnumbers the provision of fixed-line services, by a ratio of some 10:1. Beyond that, the available figures on mobile penetration still indicated considerable room for expansion on voice services alone, with only about 75 percent being the typical figure at the time.
Today, the Ghana mobile market is probably at a real figure of about 85 percent and there are six mobile operators running. Figures here (subscriber numbers in brackets) are based on those issued by the NCA. These include regional heavyweights such as MTN (over 10 million), Vodafone (over 4 million), Tigo (first to market - as Millicom - and still holding just under 4 million) and Airtel (having taken over Zain?s operations with some 2.5 million). Expresso (Sudatel from Sudan) holds about 200,000 subscribers on its CDMA network - all the other operators are GSM - and now, as of May 2012, Glo (Globacom of Nigeria) has finally launched, already subject to a fine from the NCA for a late start to operations.
These figures must be seen in the context of a country that has a population of about 25 million but, notably, a per-capita GDP of only just over USD 3,300. Ghana is often compared to its near-neighbour Nigeria because of a similar cultural heritage and shared history of British rule but this tends to gloss over the obvious differences: Ghana is smaller, less affluent and not a major oil exporter.
Vodafone Ghana Mobile Subscribers & Q-o-Q change 1Q 2010 - 2Q 2012
Source: Vodafone c. Blycroft 2012
On the positive side, Ghana has hopes of becoming a player in international oil markets with offshore licences having been granted and a number of fields having been identified and tapped. The country is also a landing point for the massive (5TB) WACS cable that runs from the UK to South Africa and involves joint investments from some 14 telcos, though none from Ghana. The cable has only about 500GB lit thus far and there is obviously plenty of additional capacity.
Behind the hype, it has to be said that Ghana will not achieve the same levels of oil output as Nigeria or Angola. The oil discoveries have resulted in a local boom for the nearby port of Takoradi and optimistic government forecasts of 12 percent GDP growth. This is compared to the roughly 5 percent growth seen previously, which is pretty much in step with the average for the Southern Africa region. Even the landing of WACS has a question mark attached, as the main operators controlling that cable are either from the EU or South Africa - which raises the question of just how much Ghanaian operators will pay (except possibly for MTN, which is a major partner in the WACS project).
The other area where Ghana?s performance has fallen short of expectations is in the critical matter of privatisation, deregulation and the role played by the NCA. As has been seen elsewhere, decisions can be reversed or revised and the criteria are often opaque.
Vodafone also inherits the baggage of Ghana Telecom, specifically an unpopular fixed-line network that is not yielding strong returns and mobile subscribers who are not eagerly migrating from voice to data services, despite the need to do so because of limited ADSL access.
The challenge for all MNOs in Ghana is to meet the need for mobile data services at a price point that works in the market. With typical ARPU figures of around USD 5 it is difficult to make money from services, especially when they depend on the costly switchgear needed for 3G (which all the country?s major operators now offer).
The unique challenge for Vodafone is to do all that and play catch-up with the dominant operator (MTN) while hindered by legacy fixed-line burdens and a watchful but somewhat unpredictable national regulator.
Nevertheless, Ghana remains an important focus because it still has potential. With GDP growth of better than average sub-Saharan levels, a significant number of consumers still not using mobile and a national economy that is looking to modernise and globalise, there is very real opportunity for MNOs.
Vodafone has demonstrated its awareness. Its local marketing covers every channel, including the whole range of social media that local users are only just beginning to explore. Of course, it is younger users doing this, which is why it plays a crucial role in long-term market development. Vodafone has also won awards for its social responsibility initiatives, specifically the Healthline project that allows consumers to check that medication is valid by text messaging.
There is much that Vodafone has done right in Ghana. Whether it will be victorious in competition with MTN is another question. And the real issue remains what the cost of such victory would be, given the relatively low revenue expectations in the Ghanaian market.
This article has been contributed by Roy Johnson, a writer specialising in IT and business topics, who has regularly contributed to PC Magazine, as well as editing TechNet Magazine for Microsoft, and appeared in 'Africa & Middle East Telecom-Week' in the issued dated 26 July 2012. Roy was formerly editor of CommsAfrica and contributing editor for Intelligence magazine.
Like to read more on the mobile market in Ghana? - read 'Treading carefully? - Glo enters Ghana'.