Ghana gets tough on Telecommunications companies

Prof. John Atta Mills - President of Ghana

The government of Ghana has descended heavily on the telecommunication companies operating in the country. The National Communications Authority (NCA) has slapped a fine totaling GH¢1.2 million on five operating telecommunication companies in the country for providing poor quality services to their clients. The mobile telephone sector in Ghana is one of the biggest and most important industries in Ghana, with regards to cash flows, consumer spending, capital expenditure, taxes and levels accruing to the public treasury and contribution to gross domestic product (GDP). Over the three years up to 2010, the industry has generated revenues of roughly GHcl.8bn a year. In 2010, the six telecom companies together made capital expenditure of GHc700m out of the country’s gross capital formation of GH¢l0bn.

The taxes and levies paid by those companies, at GH¢600m added up to 10% of government’s income of GHc6bn for 2009. All together, the industry contributed GHc900m out of Ghana’s GDP of GHc44.8bn. The mobile telephone industry now employs about 1.5 million people in Ghana either directly or indirectly. All together the industry has some USD5.6bn in investments in Ghana today. The large cash flows and the sheer visibility of the mobile telephone companies have encouraged the public sector to see it as a major source of revenues and have therefore piled up various forms of taxes. According to Ministry of Finance, currently the companies pay corporate income tax, withholding taxes on dividends, 15% Value Added Tax (VAT) and National Health Insurance Levy (NHIL), additional VAT on management fees and royalties, a six per cent Communications Levy tax on customer charges and interconnectivity, incoming international call tax of USD 0, 06 cents per minute and a NFSL/CIT tax. Added to this; annual regulatory fees paid to the NCA, Indeed government captures 37% of operators’ revenue.

The NCA’s move to fine the telecom companies, which covered the third quarter of 2011formed part of the National Communication Authority’s quest to sanction poor quality service delivery offered to clients of the telecommunication operators and also, to ensure that consumers have value for money. The key performance indicators used in measuring the attainment of service quality were Call Setup Time; Call Congestion Rate and Call Drop Rate. Article IV section 4.7 of the Ministry of Communication’s National Telecommunications Policy states inter alia that “the NCA shall establish regulations for monitoring and preventing such behaviour including such penalties for operators who violate these standards as the legislature may authorize.”

The five sanctioned companies are MTN, Vodafone, Airtel, Expresso and tiGO. According to the NCA, Airtel suffered the heaviest fine as it is expected to pay GHC350.00. The Indian owned Airtel, which has approximately 10 per cent of the market with a total customer base of two million as of the end of August, 2011, experienced a lot of traffic channel congestion in Tamale, and Sekondi/Takoradi and the Upper East and Upper West, and Greater Accra regions of Ghana.
MTN, the country’s largest telecom company and Expresso, the least patron¬ised company were also fined GH¢300,000 each. MTN, which maintained its lead as the country’s biggest mobile phone company with 9.8 million subscribers, as of the end of September, 2011 was also fined for the same offence as Airtel. According to the NCA, MTN’s poor quality service was noticed in the Upper East and Upper West, Greater Accra and Brong Ahafo regions of the country during the period under review.Expresso, formerly Kasapa, which has a sub¬scriber base of 206,606 (August 2011) went down its January figure of 244,676. Vodafone also defaulted in its service quality in three regions; Western, Greater Accra and Brong Ahafo was fined GH¢150,000.

The second largest operator, tiGO, was fined the least of GH¢100,000, having defaulted in the Western and the three northern regions. The action by the NCA, which was lauded by industry analysts and consumers alike, comes at a time when competition within the sector has reached its highest point ever. One subscriber who carries the lines of all the operators, Mr. Godwill Amenyo, a welder, told the ChinAfrica he was com¬pelled to use all the lines because he was unable to trust any of them. Ghana Chamber of Telecommunications- the body that is established to guide and influence policy formulation in the telecom industry, promote and protect the common interests of operators, and support research and development in telecom in the country, reacted to NCA’s verdict of poor performance and sanction stating amongst other things that, the robust competition in the mobile industry in Ghana leaves operators little room for “poor services” by any telecom operator who expects to survive and justify its huge investments. In short, the NCA’s conclusion that the Telecommunication industries in Ghana are performing poorly is unfounded according to the GCT.

The CEO of GCT, Mr. Kweku Sakyi-Addo insisted that, mobile operators in Ghana have consistently raised concerns over the key Quality of Service indicators used by the NCA. “We are currently in discussions with the regulator for a review. Those discussions are on-going, and therefore the Chamber is surprised by the decision of the NCA to go public on this subject.” Mr. Kweku Sakyi-Addo also stated that while Telecom Operators share the NCA’s desire to ensure that subscribers in Ghana have the same quality of service as pertains in developed countries, “there are many external factors within the Ghanaian environment which make such a desire difficult to attain, despite consistent committed efforts by operators.” These factors according to the CEO include, electric power outages, theft of diesel from back-up generators, and cable cuts. “The problem of fibre cuts is of major concern and the Telecoms Chamber is currently working with the Ghana Highways Authority, Department of Urban Roads and road contractors to minimize the occurrence,” he said.

The CEO also said that concerns about radiation from telecom masts, though not borne out by scientific facts, have also affected the roll out of cell sites in some communities. He also added that Metropolitan, Municipal and District Assemblies (MMDAs) levy astronomical charges on telecom infrastructure, with massively discriminatory disparities compared to those imposed on other industries. “These charges inhibit the roll-out of infrastructure and have an impact on quality of service,” he said. According to Kweku, the Telecoms Chamber and its members have persistently drawn the attention of the NCA and other responsible authorities to the effect that these problems have on quality of service. “We had, over the past several months, chosen the path of dialogue with the institutions and agencies concerned and we look forward to a speedy resolution.”

“We wish to emphasize the socio-economic importance of the telecoms industry in which operators have invested more than five billion US dollars in Ghana since the mid-90s. In 2010, telecommunications alone was responsible for a third of GDP growth. Nearly 40 per cent of telecom operators’ revenues go to government in taxes. A further 40 per cent of revenues are re-invested in Ghana. Even so, tariffs have dropped consistently unlike any other sector in Ghana, even as the costs of inputs have kept on rising.”

Kweku therefore called on the NCA to reconsider its rigid posture. “On the basis of the importance and impact of the telecoms industry on all sectors of the economy and on social life, we implore the NCA to reconsider its rigid posture towards the telecoms operators with a view to supporting it towards further growth in order to lead the industry to even greater economic and social benefits for the Ghanaian people,” he concluded. It is obvious that the telecommunication companies are facing a huge competition considering the market seizes and tariffs imposed on them. By the end of July 2011, there were more than 19.53m mobile phone lines in Ghana, and even as the market grows, more lines are still being subscribed to. As at the end of July, MTN had a leading 48.75% market share followed by Tigo with 20.94%, Vodafone with 18.06%, Airtel with 9.75% and Expresso, the only CDMA network, with 1.15%. The struggle for market share has persuaded all the networks to progressively lower their tariffs and this has meant that revenues are being driven by market expansion rather than rising revenues per subscriber. Indeed, the average revenue per user (ARPU) has declined dramatically in Ghana from USD9.7 in 2008 to USD6.0 in 2010. However mobile telephony penetration in Ghana is still increasing from 50% in 2008 to 61’1’0 in 2009 and 67% in 2010. By mid-2011 it has risen to 79.1 % according to Ghana Statistical Service.

Data compiled by the Ghana Statistical Service (GSS) indicate that the average subscriber and revenue evolution in 2008 which was GH¢14.6 declined to GH¢9.4 in 2010. It has dropped by a third between 2008 and 2010. The cost of mobile communications in Ghana is among the lowest in the world. If you look at Africa, apart from Kenya, Sudan, Ethiopia where the government determines cost, the next is Ghana. Looking at all the other countries including South Africa and Nigeria the rates are higher.

Even Ghana’s Vice President, Mr.John Dramani Mahama, who was Ghana’s Communications Minister during part of the 1990’s admitted that six mobile telephone networks may be too many for the size of Ghana’s market. That competition is unlikely to go away. All the mobile telephone networks in Ghana are now owned by foreign multinationals and so any merger or acquisition would have to originate from the parent firms abroad.
In spite of the concerns raised by the telecommunication operators, Minister of Communications, Mr. Haruna Iddrisu has issued an ultimatum to defrauding telecommunication service providers to pay up fines slapped on them by the National Communications Authority (NCA), or risk losing their operating licenses. ”Government will no longer tolerate poor telecom services,” said Mr. Iddrisu. He therefore, called on telecom service providers as a matter of urgency to have standard care for subscribers, saying ”Ghanaians desire better”.

Mr. Iddrisu was quick to add that many of the policies the government was putting in place were targeted at particular challenges which aim at addressing the concerns of the telecom operators and the subscribers. According to him, the NCA is setting up a committee to address the arbitrarily charges by the various Metropolitan, Municipal and District Assemblies (MMDAs).

Submitted by Francis L. Sackitey

© 2012, Francis L Sackitey. All rights reserved. – The views expressed here are purely those of the author and not necessarily those of the publishers. – Newstime Africa content cannot be reproduced in any form – electronic or print – without prior consent of the Publishers. Copyright infringement will be pursued and perpetrators prosecuted.

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