Ghana Telecom (Divestiture)

cancelled

Ghana Telecom (GT) was the national fixed local and long distance carrier in the country. The government started to privatize the company in December 1996 when it sold, through competitive bidding, a 30% stake for US$38 million to Volta Communications, a consortium controlled by Telekom Malaysia. At the same time that GT was divested, a second national operator license was awarded through competitive bidding to ACG Telesystems, a private consortium of mainly U.S. investors that would operate under the brand name Westel. GT was divested with network expansion commitments, which added up to around US$350 million over the first 5 years. The basic phone services (fixed local and long distance) were to be provided by only GT and Westel at least until 2001. In May 1997, the divested company signed a US$12 million turnkey contract with Telecommunications Consultants India Ltd. (TCIL) for the provision of equipment and installation of 10,000 lines within 18 months. The company had over 55,000 subscribers by the end of 1999. IFC financing was intending to make the company more responsive to local business by reducing network congestion and extending coverage into rural areas. GT also offered GSM mobile services through the One Touch brand name. One Touch had 100,000 subscribers by December 2002. By early 2000, Ghana Telecom needed a cash injection. Telekom Malaysia agreed to pay US$100 million for an additional 15% in the company, which valued the whole company at US$667 million. In August of that year, Telekom Malaysia paid half of the amount, US$50 million, as a good-faith deposit. At about the same time, IFC promised US$100 million -- but only if Telekom Malaysia retained management authority. In February 2002, GT ended the management contract with Telekom Malaysia, which had run the company for four years. The state bought back the 30% of Ghana Telecom shares it sold to Telekom Malaysia's local subsidiary, G-Com. The Malaysian group had originally intended to increase its stake in Ghana Telecom, but this plan was abandoned and the government terminated its management services agreement in February 2002. The government claimed that Telekom Malaysia failed to meet all its agreed terms. In particular, it did not meet targets for installation of telephone lines and improvement in the infrastructural and financial base of the company. Telekom Malaysia said it had filed an international arbitration claim seeking to force the Ghanaian government to buy back the Malaysian firm's share of Ghana Telecom. Telekom Malaysia had offered to sell its stake back to the government for up to US$103 million, but the negotiations collapsed as the Ghanaian government was not prepared to pay this amount. Apart from the US$103 million, Telekom Malaysia was also demanding a reimbursement of the US$54 million it paid to the government in 2000 for a further 15 percent share to bring their total investment in Ghana Telecom to 45 percent. The Malaysians claim that though the money was paid, the deal could not go through. Telekom Malaysia was also demanding a sum of US$10 million in outstanding fees for managing Ghana Telecom from 1997 to April 2002. None None