VZCZCXRO7175
RR RUEHMA RUEHPA
DE RUEHAR #2169/01 2841643
ZNR UUUUU ZZH
R 111643Z OCT 07
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 5506
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ACCRA 002169 
 
SIPDIS 
 
SIPDIS 
 
FOR AF/W BANKS, EEB/CIP: F Saeed, K Blakeman 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EFIN GH
SUBJECT: GHANA'S ICT DEVELOPMENT: PRIVATIZATION LIMPS FORWARD 
 
REF: A) ACCRA 1725, B) ACCRA 2162 
 
¶1. (U) SUMMARY:  This is the second of two cables on the Information 
and Communications Technology (ICT) sector in Ghana.  The first 
focused on policy and services.  This cable focuses on the 
privatization of the two national carriers: Ghana Telecom and 
Westel.  Long-stalled plans to privatize a large percentage of both 
GT and WESTEL may finally be realized in 2007, spurred on by a 
critical need for revenue to finance energy investment and a serious 
fiscal deficit.  However, the process has been less than 
transparent. End Summary. 
 
---------- 
BACKGROUND 
---------- 
 
¶2. (U) A partial privatization of Ghana Telecom (GT) in 1997 coupled 
with a management contract with the minority owner, Telekom Malaysia 
(TM), floundered in 2002 over GoG allegations that TM had not held 
up its end of the deal to add an additional 400,000 landlines and 
the GoG and TM ended up in international arbitration.  That dispute 
was not resolved until 2005 when the GoG repurchased TM's 30% share 
in GT.  A subsequent management contract agreed in late 2002 between 
the Kufuor administration and Norway's Telenor was fraught with 
allegations of bad faith and mismanagement and since January 2007, 
GT is being managed locally. 
 
¶3. (U) As part of Ghana's liberalization, a second national 
operator, Westel, was licensed in December 1996 and began operations 
in January 1999.  It was a joint venture between U.S.-owned Western 
Wireless International and the Ghana National Petroleum Corporation. 
 The venture never really got off the ground before disputes 
emerged.  Westel froze its investment over interconnection and 
spectrum allocation disputes and the NCA levied a fine (never paid) 
on Westel for failing to meet its commitment to install 50,000 fixed 
lines by 2002.  The GoG bought out Western Wireless in September 
¶2005. 
 
--------------------------- 
PRIVATIZATION LIMPS FORWARD 
--------------------------- 
 
¶4. (U) Privatization revenue projections in GoG budgets are 
consistently unmet, in recent years due in large measure to the 
failure to move forward with privatization of the two state-owned 
telecom firms:  Ghana Telecom and Westel.  The 2007 supplementary 
budget, which will be key to financing some critical investment in 
the energy sector, is counting on about $500 million in revenue from 
the sale of GT and Westel. 
 
¶5. (SBU) EcoBank and SG-SSB have been appointed as transaction 
advisors for the sale of 66% of GT to a strategic investor.  The GoG 
is expected to retain 34%. The GoG is counting on more than $300 
million from the sale of GT shares; 6 out of 18 interested bidders 
who reportedly responded to a tender have been short-listed. 
Bernard Forson, Director General of the National Communications 
Authority (NCA), told EconOff he does not have confidence the sale 
will take place in 2007.  An official of EcoBank working on the 
transaction, however, expects companies to present their bids on 
November 2 and for the deal to be signed by November 30, 2007.  He 
did not disclose which companies are in the short list but said no 
U.S. firm is involved. 
 
¶6. (U) An investor in GT will have to address fundamental problems 
such as poor support services and an overly large workforce.  There 
are 4,000 employees for landline services versus 200 for GT's more 
profitable mobile division.   Furthermore, high interconnectivity 
costs associated with GT's monopoly on SAT-3 could decrease if the 
NCA has regulatory control over GT.  The decision about whether SAT 
3 will be split from GT when the current agreement ends in 2008 lies 
with the transaction advisors.  However, the Chief Director of the 
Ministry of Communications said SAT-3 will not be split from GT but, 
to ensure access to SAT-3 on the national fiber optic backbone, the 
GoG acquired two STM-1 of bandwidth from GT. 
 
------ 
WESTEL 
------ 
 
¶7. (SBU) WESTEL, the second national telecom operator with a history 
of unmet targets to expand fixed-line coverage throughout Ghana, 
currently owns about 1% of Ghana's 360,000 fixed lines.  The two 
appointed transaction advisors are Databank Financial Services Ltd 
and NTHC Ltd. In the first quarter of 2007, the United Arab 
Emirates-based  Kinz Telecom Group (KT) outbid three other 
interested parties (AfricanSoft Ltd, CelTel of the Netherlands, and 
VodaCom of South Africa) to purchase 66.34% of the company, 
originally for $95 million (the transactions advisor had suggested a 
value of about $65 million).  However, shortly after the deal was 
announced, it went into a black box of back room discussions and 
emerged as a $250 million deal.  The buyer was required to make 
 
ACCRA 00002169  002 OF 002 
 
 
payments within 42 days.  The price included existing WESTEL debt 
for updating technology, infrastructure development, and expansion. 
 
¶8. (SBU) As of July 2007, KT backed out of the deal, unable to meet 
the unrealistic price and conditions.  It is rumored that WESTEL was 
revalued at a higher price purposely to persuade all companies but 
CelTel to drop out.  CelTel is now back in the running.  The current 
asking price is rumored to be between $125 million and $150 million. 
 
 
¶9. (SBU) Comment:  It remains to be seen whether the privatization 
of Westel or Ghana telecom will be completed this year but the 
critical need for resources may help the process along.  The GoG has 
appointed a former VAT Commissioner to keep tabs on progress of all 
privatizations underway and report weekly to the Ministry of 
Finance.  The manner in which the WESTEL privatization has unfolded 
is indicative of the kinds of problems seen rather too often in 
Ghana.  A solid process is set out but is delayed or thwarted 
mid-way through, amidst rumors of political intrigue and favoritism. 
 One of the President's sons is allegedly connected in some way to 
CelTel, the company that is now rumored to be getting the inside 
track.  End Comment. 
 
BROWN