Vodafone Acquires 70% of Ghana Telecom for US$900 mil.

Vodafone announced yesterday (3 July) that Vodafone International Holdings, a wholly-owned subsidiary of the Vodafone Group, has acquired a 70% stake in Ghana Telecom (GT) for US$900 million on a debt-free, cash-free basis, implying a total enterprise value for Ghana Telecom of approximately US$1.3 billion. The government will retain a 30% stake in the operator (see Ghana: 1 July 2008: Vodafone Rumoured Close to Acquisition of Stake in Ghana Telecom).

Following the first privatisation of GT to Telekom Malaysia a decade ago, the government bought the initial 66.7% stake back and reopened the sale in April 2007. Of the original 20 applicants, six companies were short-listed to bid—Etisalat, Belgian Telecom, Singapore Telecom, Portugal Telecom, Vodacom, and France Telecom (see Ghana: 8 October 2007: Twenty Groups Express Interest in Ghana Telecom Privatisation). Subsequently, the latter three were invited to negotiate with the government in a final selection stage and it seemed in November 2007 that France Telecom would emerge as the preferred bidder, but in January 2008 the government suspended the process, saying that the bids undervalued its assets, including the reported US$520-million offer made by France Telecom (see Ghana: 19 February 2008: Government Suspends Ghana Telecom Shares Sale).

Vodafone confirmed that as part of the transaction price of US$900 million, it "has been agreed that the government of Ghana’s fibre network assets will be transferred to Ghana Telecom". The government is currently building a 4,000-kilometre national fibre backbone primarily along the national electricity transmission system. The first phase of the project has been completed to upgrade the existing fibre ring in the southern triangle between Accra, Kumasi and Takoradi to a capacity of STM-16, and extend fibre of the same capacity to the middle of the country; the second phase will extend the backbone into the northern part of the country through Tamale (see Ghana: 29 May 2008: Ghanaian Minister Announces Completion of First Phase of Broadband Fibre-Optic Cable Construction).

In the fixed-line segment, GT had 373,798 subscribers by 31 December 2007, a 99% share of the fixed-line market. Revenues stood at US$290 million in the year ending 31 December 2007, an annual growth of 9.3%, with earnings before interest, tax, depreciation and amortization (EBITDA) of US$42 million, according to Vodafone. GT had 14,000 ADSL subscribers by the end of 2007, which represents a 90% share of the retail ADSL market. Some 8,000 of these subscribers (57%) were in Greater Accra; the operator says that the service is now available in every regional capital and some district capitals (see Ghana: 19 March 2008: Ghana Telecom Reports 14,000 ADSL Subscribers).

“Ghana is one of the most attractive markets in Africa, with mobile subscribers growing at more than 55% per annum and mobile penetration around 35%”, said Arun Sarin, Vodafone’s chief executive, in a company press release. “Our extensive operating experience, together with our portfolio of products and services, position us well to deliver a superior mobile experience to Ghanaian customers and significantly improve financial performance. I expect that our investment will generate substantial benefits for Vodafone and for the Ghanaian economy, and we are delighted that we will be working in partnership with the government of Ghana.”

Outlook and Implications

The transaction remains subject to certain closing conditions, including approval from the Ghanaian parliament. Vodafone said that it expects the transaction to close in the third quarter of 2008. However, according to the Ghaniaian Chronicle, the transaction is likely to face scrutiny in parliament, with the opposition spokesman for communications raising concerns as to why the stake increased from 66.7% to 70%, why the national fibre-optic backbone had been included in the transaction, and even whether Vodafone satisfies the mandatory selection criteria that “the successful bidder must have significant experience operating a fixed wireline telecommunications network with [a minimum of 10 million lines/subscribers]”.

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