Committee Report Recommends Renegotiation of Ghana Telecom Privatisation to Vodafone

In July 2008, Vodafone announced that it had reached an agreement with the government of Ghana to acquire a 70% stake in incumbent fixed-line operator Ghana Telecom (GT) for US$900 million (see Ghana: 4 July 2008: Vodafone Acquires 70% of Ghana Telecom for US$900 mil.). The transaction included a number of key assets, including mobile operator One Touch, ownership of exclusive rights of access to the Sat-3/WASC submarine cable from Ghana, and the fibre-optic national backbone currently being built by the government (see Ghana: 18 August 2008: Vodafone Completes Acquisition of 70% Stake in Ghana Telecom).

Opposition parties—at the time including the National Democratic Congress (NDC), which is now in government—complained that the deal undervalued GT. Nevertheless, parliament ratified the sale with 124 votes against 74, which should have brought formal closure to the opposition's objections to the sale (see Ghana: 15 August 2008: Parliament Ratifies Vodafone Acquisition of Ghana Telecom). However, the NDC made a manifesto pledge to review the agreement and, to that end, Minister of Communications Haruna Iddrisu formed a five-member committee in April 2009 to investigate various aspects of the deal (see Ghana: 28 April 2009: Government Committee to Investigate Ghana Telecom Privatisation).

The Committee's report on the sale and purchase agreement (SPA) was reportedly submitted to the government in early September 2009. According to a press statement issued on 15 October by the Office of the President, the Interministerial Review Committee found that:

• "There was executive interference in the sale of GT, with former president John Kufuor being the one who agreed on the transaction price, technical considerations and the underlying legal assumptions of the Vodafone offer of 15 May 2008. These negotiations by the former president were highly irregular, unconventional and did not rely on expert advice."
• "The government of Ghana did not get value for money from the sale and, through a series of complicated financial arrangements, the government of Ghana realised only US$266.57 million from the SPA."
• “The enlarged GT Group's 70% stake could have been sold for more than the SPA price of US$900 million because the value put on GT by the Transaction Advisors was higher and Telkom SA offered US$947 million for a much lower stake of 66.67%.”
• “The National Communications Backbone Company (NCBC), which was added to create the Enlarged GT Group, was grossly undervalued. The fibre-optic network is a strategic national asset and should have remained an independently operated infrastructure as originally intended.”
• “The allocation of a 3G licence under the SPA was not in compliance with the NCA Regulations 2003 (L.I. 1719), which stipulates that such a licence may only be granted by public tender where the unassigned frequencies are limited, as is the case with 3G licences.”
• “The ratification of the SPA entered into between the government of Ghana and Vodafone International BV on 3 July 2008 is unconstitutional. Parliament's ratification of the SPA cannot cure it of any illegality because a ratified international commercial agreement is not of the same status as an Act of Parliament”.

According to the press release, “the Committee's terms of reference was to examine all issues relating to the management and finances of GT from the tenure of the Telenor Management Partners, which later metamorphosed into Telecom Management Partners to the period of the sale of 70% shares of GT to Vodafone; and an examination of the terms and conditions of the SPA, the contract with the transaction advisers and issues after the sale”. The underlying reason for the review, says the release, was that “the then-minority group in Parliament was urged on by a large section of Ghanaians strongly opposed to the sale on grounds, among others, that the sale was shrouded in secrecy, fraught with irregularity, ignored time-honoured procedures, contravened the laws of Ghana, did not guarantee value for money and therefore was not in the strategic interest of Ghana”.

Outlook and Implications

The Committee made the following seven recommendations to the government, according to the statement, but there is no legal obligation to implement the Committee's recommendations. The government has said at this stage that it has taken note of the Committee's findings and recommendations, and will soon make public its position. The recommendations include:

• The government should consider the option of renegotiating the SPA with Vodafone, and in particular a reconsideration of parties to the SPA; compliance or otherwise of the SPA with Ghanaian law, particularly the NCA regulations and the Internal Revenue Act 592; value for money/transaction consideration; retention of the national fibre-optic backbone by the government as a strategic national asset; decoupling of the Ghana Telecom University from the transaction (already done); and return of GT investments to the government, such as the Telecom Emporium.

• The National Communications Backbone Company must be decoupled from the enlarged GT Group and a public entity established with a nationalist mandate and given the resources to complete and expand the backbone to all socially and economically necessary locations to enable it to act as the foundation for the government's ICT policy.

• A forensic audit must be conducted into the affairs of GT to cover the TMP and the IMC, with management at the time made to answer for their stewardship.

• GT-Vodafone must be requested to provide detailed reporting requirements based on forensic accounting and reporting principles. This should follow the establishment of actual sourcing and use of funds purportedly introduced by the current management as working capital.
  
• The SPA was negotiated in an inelegant manner by government, which gave everything and took nothing in the context of the inequalities in bargaining power that were allowed to prevail. This should never be allowed to happen again.
• 
  The government must conduct a serious audit into the way and manner in which it negotiates such business deals. A working party of experts consisting of technical experts and negotiators should be in charge of such negotiations.

• Copies of all government agreements should be lodged with government archivists as required by law, and with the attorney-general as the second repository, as well as copies retained by the respective MDAs, who should superintend the execution and implementation of the respective public agreements to ensure that Ghana's best interests are protected.