The agreement involves the payment of $900 million by Vodafone International Holdings of the UK, an amount described by the leading Ghanaian economist, Kwame Pianim, as crucial for the sustenance of the national budget.
The Minister of Communications, Dr Benjamin Aggrey-Ntim, who stated the government’s position at a press conference in Accra yesterday, also urged the public to discuss the issue devoid of partisanship and a restricted outlook.
He said at the very core of the idea to sell 70 per cent of the shares of GT was the need to inject private sector capital into the company, preserve it and ensure that it grew to restore its leadership role in the market.
He intimated that given the current competitive market forces at play in the country and the negative balance sheet status of GT, it was unlikely to see the company remain competitive over any appreciable length of time.
Dr Aggrey-Ntim said the deal created the opportunity for the government to partner the private sector to re-capitalise the company to the tune of more than $500 million in order to bring about innovation in its operations.
The government would thereby be free to apply revenue accruing to the state to meet the cost of other social responsibilities.
He said it would also allow the company to upgrade its technologies in order to compete in the rapidly changing telecom sector and prepare itself for listing on the Ghana Stock Exchange (GSE) in 2010 to enable Ghanaians to participate in the ownership of the company, contrary various opinions being expressed that the company was being sold.
Dr Aggrey-Ntim noted that there were about 4,200 workers at GT and added that considering the company’s current financial situation, if no action was taken now “we stand to face the unfortunate situation of making these workers redundant”.
“The implication of this to the workers and their extended families is unthinkable. This is the reason the government is taking steps to protect the interest of the workers,” he added.
Addressing issues pertaining to the security and tenure of staff as raised by the Communications Workers Union (CWU) of the Trades Union Congress, Dr Aggrey-Ntim, said he had assured the union that those issues had been taken on board in the negotiations with Vodafone.
He said in the agreement, the government and Vodafone had committed to protecting the job security and welfare of all employees and added that the workers had to pledge their commitment to meet their sector and individual objectives that would be agreed upon under the new management.
Vodafone, he said, had expressed to the union its confidence in the management and technical competence of the current staff of the GT.
“Furthermore, the commitment of the government is demonstrated in the agreement to ensure that the new GT will be free from all debts.
Accordingly, steps have been initiated by the government of Ghana to ‘ringfence’ all debts so that the investment of $500 million to be made into GT will be applied solely to promote its expansion.
This, in turn, will help to secure the full engagement of the workers at all times in a competitive market. This assurance we have also given to the workers,” he added.
On the labour front, he said the collective bargaining agreement (CBA) of the terms of employment applicable to GT was to be respected at all times.
“This has been captured in the agreement and the government of Ghana has guaranteed an amount of money to take care of the separation arrangements, if any, arising out of the collective bargaining arrangements over the years ahead,” he added.
Regarding the calls that the government should inject money into the company, instead of selling some of its shares, he said the government did not have the financial resources to revamp the company or make it viable, hence the decision to sell part of it.
Tracing the events leading to GT’s current situation, Dr Aggrey-Ntim said in 1997 Telekom Malaysia paid $38 million to acquire 30 per cent in GT and failed to pay any dividend for the entire five-year period it served as a strategic investor.
Additionally, he said Telecom Malaysia failed to meet the targets set under the GT business plan. Consequently, when the terms of contract entered into between the government and the company expired on February 19, 2002, the government did not find it expedient to renew the contract.
Subsequently, he said, through an open and transparent international tender process, Telenor Management Partner (TMP) was selected under a management services agreement to manage GT.
He said at that time the government of Ghana did not deem it expedient to offer shares to TMP because of the dispute on share value then going on between the government of Ghana and Telekom Malaysia.
Telenor, he said, was, accordingly, contracted to help to manage the company and acquire shares at a later date when the privatisation exercise would be re-opened.
After the expiration of the three-year management contract with Telenor, the contract was not renewed.
Dr Aggrey-Ntim said although Telecom Malaysia, at the time of its departure, had not paid any dividend to the country, it sought to price the equivalent of the 30 per cent share value at nearly $100 million.
The issue, he said, was taken to an international arbitration and the government paid $52.2 million to Telecom Malaysia, instead of the nearly $100 million that it had sought to demand.
He said the government later advertised for strategic investors to express interest in GT, following which 17 companies bid. Three, namely, France Telecom, Portugal Telecom and Vodafone were short-listed.
The minister said Vodafone was short-listed because an evaluation of its profile revealed that it owned 50 per cent of the shares in Vodacom South Africa, adding that it was considered advantageous, since Vodafone was in a better position to bring to GT its global presence, in addition to its strength as an African telecom market player.
He said in May 2008, the government received an updated offer from Vodafone to acquire 70 per cent interest in GT for a total consideration of $900 million on a “debt-free, cash-free” basis.
That offer, he said, corresponded to an enterprise value of $1,286 million for 100 per cent of GT, adding that the transfer and management of the National Communications Backbone were included in that offer.
He noted that as of December 2007, the total assets of GT were GH¢531 million, as opposed to its total liabilities of GH¢558 million, giving a negative networth value of GH¢27 million.
By May 2008, the total value of assets of the company was GH¢552 million, against its total liability of GH¢586 million, resulting in a negative networth figure of GH¢34 million.
That, the minister said, definitely should be a source of worry to any investor, the government inclusive.
“This situation is rapidly leading to GT’s insolvency and total collapse if no immediate action is taken,” he added.
Regarding the fibre optic backbone, he said considering the high indebtedness of GT and the deteriorating circumstances of the company, the declining valuation figures necessitated the aggregation of other state communication infrastructure that also required investment to build.
He said that was why consideration was given to the transfer and management of the national communications backbone in the offer.
Hours before Dr Aggrey-Ntim stated the government’s position at the press conference, the Ghana Trades Union Congress (TUC) had joined the ranks of those opposed to the deal and argued that the deal lacked transparency.
The labour union said “the Communication Workers Union (CWU) of TUC, which represents GT workers, was neither properly informed nor involved in the discussions and negotiations leading to the sale of the shares”.
It added that “the TUC is of the view that it is inappropriate for a government which has barely five months to leave office to hurriedly sell such an important and strategic state asset.
The government has not subjected this deal to public debate. But such an important deal cannot be shrouded in secrecy”.
This was contained in a press statement signed by its acting Secretary-General, Mr Kofi Asamoah.
The statement described GT as an important strategic national asset and said the decision to dispose of that quantum of shares should be subjected to thorough public debate so that some form of national consensus could be forged before a definitive decision was taken.
It said in an election year the TUC did not expect the government to enter into such deals which had the potential to spark “controversy and social tension”.
The union agreed with the government on the need for the recapitalisation of GT but was of the conviction that there were other equally viable options that could be explored to ensure that GT remained a public enterprise.
“The government should, therefore, explore other options which will ensure that GT remains viable, not only economically but at the same time able to provide communication services for the people of Ghana.
In our view, this goal can be achieved only if GT remains a public asset,” the statement stressed.
It, therefore, called on the government to withdraw the proposed sale agreement before Parliament and subject the matter to broad public debate and consultations on available options.
According to the statement, multinational companies such as Vodafone came in for profit and not to fulfil social obligations, noting that in the proposed deal, the GT University College was to be hived off GT within 12 months of the signing of the sale agreement.
That, it said, “is a clear indication of the company’s lack of commitment to social responsibility and it is very likely that the privatisation of GT will also lead to mass lay offs”.
“We are not convinced that Vodafone, or any other foreign private company, will meet the social obligation of providing communication services for Ghanaians in all parts of the country,” the statement intimated.
It, therefore, stressed the need for the government to back out of the deal, since there had been similar cases of proposed sale of state assets in the West African sub-region in which governments had had cause to reverse the agreements their predecessors had entered into.
It said the TUC had resisted the sale of strategic state assets, including the Ghana Commercial Bank (GCB) and the Agricultural Development Bank, on the same grounds, and indicated that like those banks, GT had branches in all parts of the country providing telecommunications services for Ghanaians.
According to the statement, information gathered by the TUC indicated that the government and Vodafone had entered into negotiations towards reaching an agreement on the sale and purchase of 70 per cent of the 50 million ordinary shares in the issued share capital of GT currently wholly owned by the Ghana government.
It noted that the shares were being sold for an amount of $900 million calculated on the basis that the government would transfer the fibre backbone, among many other “unacceptable” commitments.
Besides, it said the government intended to inject further money into GT to the tune of $228 million by way of shareholder loan and that it had agreed to contribute $40 million towards employee restructuring expenditure.
The proposed sale of the 70 per cent of GT shares to Vodafone has been opposed by the Minority in Parliament, opinion leaders and civil society organisations.
However, a Ghanaian economist, Mr Kwame Pianim, argued this week that the sustenance of the Ghanaian economy depended on the money to be paid for GT by Vodafone.
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