Put on your television. Your radio or open a newspaper. Chances are you
will be inundated with adverts from at least a couple of the six mobile
telephone network operators in Ghana before you are finished.
Actually this is to be expected. Like, say, Coca Cola products
virtually everyone uses mobile telephony. But unlike Cocoa Cola, no
company has clear market dominance and all six mobile network operators -
including Glo which is only now about to start up - are in the thick of
intense competition for customers.
By the end of July this year, there were more than 19.53m mobile phone
lines in Ghana, and even as the market moves from growth towards
maturity, 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 intense competition among the five companies already operating
networks, and the specter of the very price competitive Glo launching
its Ghana network imminently have seen an unbridled price war which is
benefiting mobile telephony subscribers but which is curbing industry
profitability. The struggle for market share has persuaded all the
networks to progressive lower their tariffs and this has meant that
revenues are being driven by market expansion rather than rising
revenues per subscriber. Indeed average revenue per user (ARPU) has
declined dramatically in Ghana from U5D9.7 in 2008 to U5D6.0 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 %.
But while the mobile telephony networks step up their advertising and
promotions budgets, to remain in the faces of subscribers, profit
margins are being squeezed in part by the frenzied competition. Even
Ghana's Vice President, John Mahama, who was Communications Minister
during part of the 1990’s admits 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.
But from the efforts of the recently formed Ghana Chamber of
Telecommunications so far, it is sharply rising costs rather than
sharply falling revenues per user that are worrying the network
operators the most or more specifically, rapidly escalating taxes,
duties and other charges imposed by the central government, various
local governments, and the industry regulator, the National
Communications authority, NCA, as well.
To be sure, the mobile telephony sector 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, GOP, 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, AU together, the industry
contributed GHc900m out of Ghana's COP of GHc44.8bn. The mobile
telephony 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.
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 USD0,06 cents per minute and a
NFSL/CIT tax. Add to this; annual regulatory fees paid to the NCA,
Indeed government captures 37% of operators' revenue.
The various local governments in Ghana are getting in on the act too as
they also increasingly see the mobile telephone firms as the panacea to
their own fiscal problems, laments Kwaku Sakyi¬ Addo, chief executive
of the telecoms chamber.
“One of the longest running problems that is hurting telecom companies
are the costs and hurdles in deploying infrastructure and the complete
absence of predictability' in how government ministries, departments,
and local authorities determine the cost of business operating permits,
(BOP) when it comes to mobile phone operators.” He gives examples: in
one district the annual BOP for insurance companies is GHc200;
commercial banks GHc700; Electricity Company of Ghana, ECG, GHc1, 000;
but for mobile phone companies, it is GH¢9, 000.
Another example: in one district, the BOP levy for a large industry and
for mobile operators was GHc2 000 in 2009. The following year, whilst
the others remained the same, that of mobile operators was increased to a
total of GH¢22, 500.
“Just a couple of weeks ago, one operator paid nearly USD400,000 to the
Ghana Highways Authority, GHA, for a permit to lay a fibre optic cable”
Sakyi-Addo reveals.
“The cable runs for about 400km. Each district assembly is levying an
additional charge for the cable running through their towns. One
district has now ordered the operator to pay an extra GH¢420,000 and has
stopped the operator from carrying out the job.”
The NCA has got in on the act too with support from the Ministry of
Communications itself. The authority is now about to start building a
GH¢30m 12-storey head office. Instructively the NCA is funded largely
from fees derived from mobile operators. Also GIFEC which is funded by
mobile operators, who each contribute one percent of their revenues, is
helping to finance the GHc36m National data Centre.
Now the NCA has commenced enforcement of its mandatory “first world
quality of service standards” which the mobile operators are expected to
meet. The chamber argues that the penalties imposed for failing to meet
those standards are not proportionate to the infractions.
Government is not impressed by those complaints. Indeed the Minister of Communications, Haruna lddrissu only last week
Source: Ghanaweb
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