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Alert: Ghana’s telcos in trouble; some face imminent collapse

bycitibusinessnews
March 17, 2016
in Business, FEATURES, TECHNOLOGY, Top Stories
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Ghana ‘s telecom industry is likely to see a number of telecom operators fold up in the coming years if conditions do not improve.

Persons familiar with the development are predicting players in the industry with the least customers are likely to be hit the most.

[contextly_sidebar id=”8yfVLPQNb7gqcDUwuJFq7bNxshymOTpG”]The development  follows poor returns being made by majority of the telecom operators as increased competition and infrastructure cost eats away their revenue.

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There are currently 6 telecom operators in the Ghana MTN, Vodafone, Tigo, Airtel, Glo and Expresso and 3 functional data services providers Surfline, Blu Telecoms and Busy Ghana who roll out 4G services.

Others like Goldkey have been issued with 4G licenses but are yet to commence operations.

Telecom giant MTN four years ago predicted that Ghana ‘s telecom industry will be have at least 6 players.

Fast forward to 2016, MTN now believes the industry will in a couple of years be unable to sustain more than 6 players.

Sources familiar with the development agree with MTN and further predict that there may be a likely buyout of some of the telcos and data service providers by major players in the industry and in some cases an exit or collapse of some of the companies.

Of all the players in the industry it appears MTN is the only one who is currently making good returns in its operations.

Vodafone Ghana is also currently making some financial gains but not as impressive as its parent company will want.

While majority of the telcos have refused to make public their financials, sources close to the operators have told Citi Business News most of their balance sheets are not looking good.

MTN which is the only player who may be able to acquire a struggling telco should any such opportunity arise says it will make the call when the time comes.

According to MTN Ghana’s CEO Ebenezer Asante ‘there are lot of things to consider when you have to acquire, so we will wait and when the time comes we will make a call’. He said.

Challenges in telecom Industry

The telecom sector has been a challenging one for some time.

Majority of the operators are unable to break even, let alone make profits.

A number of them had earlier told Citi Business News they are yet to recoup investments they made in the sector.

According to players in the industry the sector is struggling to stay afloat as profits dip and competition increases.

Ghana’s recent power crisis and hikes in utility tariffs is reported to have eaten away a chunk of their revenues.

MTN recently reveled it intends to spend at least 48 million cedis in 2016 due to the utility hikes.

While sim box fraud, theft of batteries at cell sites, low penetration of data, economic challenges including power crisis, cedi depreciation, forex volatilities  among others have hit hard on the operations of telcos, while overcrowding of the industry has also affected returns of players.

A player in the industry who spoke to Citi Business News on condition of anonymity said ‘most of the telecom companies are struggling, the sector is not as profitable as before, with the exception of MTN the rest are virtually on their knees’.

MTN Ghana’s CEO on March 10, 2016 delivering a presentation on the company’s performance for 2015 said ‘some of the telecom companies are not making money, so they are not paying corporate tax.’

The industry has however been rated as a successful one for some time, justifying the current tax regime slapped on it by authorities.

Over taxed industry?

A recent study conducted by Price Waterhouse Coopers (PwC),  a multinational consultancy firm, for the Ghana Chamber of Telecommunications (GCT) in 2015, revealed that the industry is one of the most taxed sectors in Ghana, and mobile operators are subject to 14 different taxes and regulatory fees, in addition to various one-off charges.

Mobile operators according to the report pay US$650 million in taxes each year, representing about 40% of total revenues in the sector.

The report further disclosed that telecom operators in the country paid a whopping amount of GHC1.05 billion in total taxes in 2014 alone to government and its agencies.

MTN Ghana in 2015 paid a whopping 675.6 million cedis in taxes and about 605 million cedis in 2014.

Of this amount 53 million cedis went into the stabilization levy, 16 million to Pay As You Earn (PAYE) tax and  29 million for withholding tax.

MTN in 2015 alone also paid the National Communications Authority (NCA) the regulator of the telecom industry 43.7 million cedis in regulatory fees.

The sector is also excluded from tax exemptions granted to various other sectors.

The Ghana Revenue Authority (GRA) however says the industry is not over taxed.

According to the Deputy commissioner in charge of policy programs at GRA Edward Gyamerah  ‘I do not understand those who say that we are over taxing the telecom sector in the country. I say so because very little has changed in terms of the tax regime since 2007. The telecommunication companies pay 25% corporate income tax and this has not changed since 2007 and virtually all the other taxes have remained the same over the years . I therefore find it difficult to agree with anyone who says that those in the telecoms sector are paying too much in terms of taxes’.

Layoffs

The industry in the latter part of 2015 and early 2016 was hit with  major layoffs and resignations as telecom companies restructured to stay in business.

The industry employs over 5,000 people directly, and about 1.5 million people indirectly.

Workers of three of the operators in the industry namely Tigo, Airtel and Surfline have so far been the worst hit by the layoffs.

Airtel Ghana for example late last year laid off a number of its workers in what  was described as a restructuring exercise.

Though it still remains unclear, which arms of the company were affected and how many people were  made to go home, Citi Business News checks reveled majority of the workers left by the end of January, 2016.

Aitel Ghana is not the only telecom operator to have made that move, Tigo Ghana in February, 2016 sent scores of its workers home following a major restructuring exercise.

The dismissals affected the company’s commercial, marketing, call centre, PR, HR and procurement wings among others.

Tigo in mid 2014 embarked on similar move.

Another company that has had to let some of its workers go home this year is surfline.

The company’s customer service wing has so far been the most affected by the layoffs.

Unpaid salaries

While some of the companies in the industry have been forced to let staff go others are struggling to pay staff.

Late last year the likes of  Glo and Expresso saw a number of their workers exit the companies over unpaid salaries.

Glo for example was hit with massive resignations from its staff after the company begun shutting a number of its outlets across the country.

The company has closed about 15 out of its 25 outlets across the country.

Most workers of Glo who spoke to Citi Buiness News on condition of anonymity at the time said a large chunk of Ghanaian staff also resigned because the company, since its arrival in Ghana, had failed to increase wages and salaries.

Though management has been tight lipped about the development, information available to Citi Business News indicate that Glo in the last 2 years has incurred massive losses in Ghana, and has failed to meet its sales target.

Poor quality services

Many of the operators in a bid to survive have been rolling out a lot of promotions and highly competitive tariffs which have done them more harm than good.

Most customers of telcos have not been and are still not impressed with the quality of services being rolled out by them.

Many customers also complain about the poor customer service rolled out by telcos in the country.

Early this year  subscribers of Vodafone were up in arms against the telco following difficulties with loading credit, making calls as well as unexplained credit deductions.

Most of its subscribers took to twitter after the network failed to respond to their concerns.

Another telco whose customers this year suffered service disruptions was Airtel.

Checks reveal that the disruption was  due to a system upgrade.

The telecom operator after rectifying the disruption compensated its customers.

Many players have blamed the NCA for not being firm on the telcos and hugely contributing to their output ie poor customer care and quality of service.

Though the NCA has on a number of occasions sanctioned telecom operators, there are calls for it to

be more firm on operators.

–

By:  Vivian Kai Lokko/citifmonline.com/Ghana

 

 

 

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