It is a universal conundrum that foreign direct investments (FDI) – presently being wooed relentlessly by both the economically mighty and weak countries alike, ostensibly to introduce world class technologies into the economies of the host nations to make them more efficient and, by extension, improve the living standards of their people – invariably undermines the host nations’ control over their resources in the long run, while also marginalizing their entrepreneurial class from the commanding heights of the national economy.
The barefaced risk of this phenomenon is extremely telling in Ghana’s telecommunications sector, where all of its six network operators are foreign multinationals. There’s no gainsaying that opening up the sector to foreign participation has greatly modernized the industry, which barely two and a half decades ago could only boast of about a quarter of a million subscribers on fixed line telephones but now has total registered mobile phone voice accounts far outstripping the 25 million total national population, and data accounts just under 14 million. Downstream operations have also created entrepreneurial opportunities for many a Ghanaian, as well as, top corporate positions for smart, well-educated indigenes.
But the downside reality has hit the country hardest, as dividend outflows and unfettered revenue repatriations by the network operators on their maturing investments have contributed in no small measure to the foreign exchange challenges that have destabilized the country’s economy, since the beginning of this year.
Thankfully though, the National Communications Authority (NCA), the industry regulator , seems to have clairvoyantly anticipated this moment and had, a couple of years back, initiated the process of clawing back some control over the industry into Ghanaian hands, albeit circuitously.
A new regulation, which makes the deployment of the new 4G LTE technology (this ramps up speeds of at least five times faster, for uploading and downloading of data, than the 3G technology deployed by the existing operators) an exclusive preserve for Ghanaians, seeks to hive data services in the industry away from the foreign network operators to wholly-owned Ghanaian firms.
Officials of the NCA opine they expect data usage to grow exponentially in the near future, with user behaviour angling more in favour of data than voice.
Savvy entrepreneurs have latched onto the vision really fast. Three local companies, Surfline Limited, GoldKey Properties Limited, and G-Kwiknet Limited (now BLU Telecoms) obtained Broadband Wireless Access (BWA) licenses on the 2500 – 2690 MHz band from the NCA, mid-2013, to implement 4G LTE (long-term evolution) technology in Ghana. Surfline is already operational with the other others expected to follow suit soon.
Initial response to Surfline’s operations has been positive with people trooping to the company’s shops in Accra to assess their devices and services. An obviously elated Rosy Fynn, Surfline’s Marketing Director, notes that it’s a good sign and the company couldn’t have asked for a better response; “as we are trying so hard to distinguish Surfline from other data providers in the market today, which is the most important thing.”
She believes the industry is rather fatigued with people coming in and promising a whole lot of things and failing to deliver; “and that kind of situation is what we are trying to avoid and which is part of the reason we gave our devices to people before we launched, so they will get a feel of what it is and appreciate it.”
That definitely sets the tone of the upcoming competition. And this initial response of consumers is indicative of trends in the industry but existing telcos are obviously not taking the new developments lying on their back. Industry grapevine has it that some of the giant telcos offered to pay three times more, than the US$6 million licensing fees the NCA charged the wholly-owned Ghanaian companies, just to be included in the deployment of the 4G LTE.
Clearly, their offer was rejected but the honeymoon for the Ghanaian companies may not last for too long. The traditional telcos have, since the NCA expressed its intentions, released various enhanced data services with the mind of attracting more customers and improving their market share.
Their haste is informed by the fact that the new regulations provide for the wholly-owned Ghanaian companies to migrate into voice, whenever they cover 50% of District Capitals within the stipulated first five years of their operations, thereby posing a mortal threat to some of the foreign telcos in the country.
The ominous competition notwithstanding, Fynn says a contemplation to pursue a voice agenda is not even on their remotest horizon since; “for now our focus is data, we’re really keen on getting that data access right and giving best quality to consumers.”
She notes that Ghanaians, often, have a perception that if a business is Ghanaian-owned then quality might be suspect, or compromised; “and that is definitely one of the perceptions we’re trying to dissuade. We’ve put a lot of time and energy into it to ensure that this company can match, pound for pound, any company across the globe. We really want to have a world class example here.”
But competition is also bound to be reflected in fees charged for various services. Ghanaians are peculiarly sensitive to the pricing of telecom services, with regards to their affordability.
Surfline’s founder, Mr. John Taylor, argues that one can offer the customer cheap prices; “but if the customer takes that and cannot even get to connect then your guess is as good as mine. I think you can offer the customer a service at a price that’s a little higher but if they get to connect much easily and they get to experience a service which is impeccable, they will decide which one to go for.”
Be that as it may, data compiled by Surfline on the round figures on rates charged by the other industry players show the company could even be charging lower rates than the long-established telcos. For example, Tigo has a 5.5GB bundle for GHC30 and a 10GB bundle for GHC50, which, on face value, are the most affordable on the market, except that, compared to Surfline, Tigo’s are on 3G network and they have a 30 expiry date.
Surfline, on the other hand, has a 2GB bundle for GHC25, which is same as what Glo customers pay for 2G on a 3G networks. Meanwhile, Airtel is selling 2GB on a 3G network for GHC30, which is GHC5 higher than the same data capacity on Surfline’s 4G LTE network.
It is also noteworthy that whereas the 3G networks have 30-days expiry periods on their bundles, Surfline, to whip up the competition, has announced a rollover of remaining data capacity from an existing bundle to the next after the 30-day expiry, which means effectively Surfline bundles have no expiry periods.
Naturally, the strategic approach of the two other 4G LTE licensees, when they commence operations, would introduce other dimensions into the competition. But clearly, the efficiency of the technology deployed will be a critical factor in the future dynamics of the industry in Ghana.
The LTE is a radio platform technology that allows operators to achieve even higher peak throughputs than the HSPA+ in higher spectrum bandwidth, now being used by the telcos. The overall objective for LTE is to provide an extremely high performance radio-access technology that offers full vehicular speed mobility and it is part of the GSM evolutionary path for mobile broadband, following EDGE, UMTS, HSPA (HSDPA and HSUPA combined) and HSPA Evolution (HSPA+). And although experts say HSPA and its evolution are strongly positioned to be the dominant mobile data technology for the next decade, the existing family of standards must evolve toward the future and, for many operators, HSPA+ will provide the stepping-stone to LTE
LTE assumes a full Internet Protocol (IP) network architecture and is designed to support voice in the packet domain. It incorporates top-of-the-line radio techniques to achieve performance levels beyond what will be practical with CDMA approaches, particularly in larger channel bandwidths.
This naturally gives the Ghanaian firms a head start in a market that is increasingly getting sophisticated and demanding seamless, high quality services. But that is on the assumption that Ghanaian entrepreneurs will seek to deploy top-of-the-range of the emerging technology, while they learn the ropes in quality service delivery; an area where the existing telcos obviously have obtained superior competencies and a higher competitive advantage.
Ghana’s telecommunications industry may have been the classic case study of how technology, multinationals and governments have driven globalization with its outcomes of greater global wealth but with its inherently flawed mechanisms that create only a few winners and vast numbers of losers. Recent developments in the country’s industry could also provide useful lessons in how to manage it for mutual benefit.
That, however, is largely dependent on government staying the course of regulations that seek to open up the space for local enterprise. And domestic entrepreneurs must also think global in the sense of deploying the best technologies, coupled with best practice, to beat the competition and help retain more of the benefits at home.
Early indications are that Ghana is in the game to win – not least, in its telecommunications industry.