Share Square: Ghana

Ghana had an estimated population of 28.0mn people and 37.3mn mobile connections at the end of 2016, giving a mobile penetration of 133% - the second highest in the 15 countries comprising the Economic Community of West African States (ECOWAS) with only Gambia ahead (154%), and the eighth highest across the whole of Africa. Ghana’s mobile penetration is similar to the average in Western Europe, although the number of SIMs per unique subscriber is somewhat higher (1.8 versus 1.4) implying that penetration of unique subscribers is somewhat lower than there.

Around 97.3% of connections are pre-paid, which is the lowest amongst the ECOWAS countries, the majority of which have in excess of 99.9%. Mobile broadband use has seen significant growth in recent years with 42% of connections (15.5mn) now classed as mobile broadband. This is the highest in ECOWAS except Cabo Verde (at 52%), and it compares well with South Africa (with 50.3% mobile broadband connections).

Recently 2G subscriptions have begun to decline with growth being driven primarily by 3G. 4G growth has been limited to date as, for some time, only the new ‘4G-only’ entrants could offer the service – although MTN has now launched its service (in mid-2016) and is rapidly increasing its subscriber base.

Nine Mobile Network Operators (MNOs) serve the Ghanaian market (See figure 1). MTN continues to be dominant with a steadily increasing market share that reached 52% by end-2016 (up from 47% at end-2013). Vodafone is in second position, someway behind but with a relatively stable market share of 22%. Airtel and Tigo have similar market shares, at 12% and 11% respectively, although Airtel’s has been relatively steady whilst Tigo’s has been slowly falling in recent times. Glo’s market share stands at 2.2% at end-2016, having fallen from 5% at end-2013, whilst Expresso’s share is small (and decreasing) at 0.3%. Three LTE-only operators – Surfline, Blu and Busy (Afrimax) – share the remaining 0.7% of the market.

2G has been live in Ghana since 1996 when Investcom (subsequently acquired by MTN) launched its network – with the other operators following in subsequent years. The first 3G launch occurred in 2008, with other launches occurring over the next 4-year period. Blu and Surfline were the first to launch 4G networks, in 2014, with Busy and MTN following in 2016.

Initially, in 2013, three 4G-only licensees were announced by the regulator, the National Communications Authority (NCA): Surfline; Goldkey; and Blu (formerly G-Kwiknet). The licences, for broadband wireless services, provided access to spectrum in the 2.6GHz TD-LTE band but did not allow provision of voice from the outset. Voice could be offered after six years of operation, if certain coverage obligations were met. The existing mobile network operators were not able to bid for the licences, as it is understood that the NCA wished them to focus on 3G deployment. Although the 4G-only licences were for broadband wireless services, and not mobile, we have included them here as they use LTE technology, sell (in some cases) LTE-enabled tablets, and are expected to play an important part in the development of the mobile market in the coming years.

Both Surfline and Blu launched service in 2014, but Goldkey has yet to do so and it is not clear how the 18-month deployment deadline will affect it. Busy, a broadband wireless services WiMAX operator acquired by Afrimax in late 2015, has been upgrading its network with LTE equipment, however there is a lack of clarity on whether it is licensed to provide the LTE services at 2.3GHz that it is now doing. It is understood that there are discussions at government level to clarify its status, however its LTE network has been live since early 2016.

MTN was awarded LTE spectrum in the 800MHz band in late 2015 via an auction process and launched its network in mid-2016. MTN is considering an IPO in 2017 to meet the minimum local ownership requirement associated with that award.

Broadband Home (branded as Zipnet) has a licence in the 2.5GHz band to provide broadband wireless access services. It commenced service in 2003 using WiMAX and is undergoing a programme to upgrade its network to LTE. As such, Zipnet is not yet captured above.

4G coverage is relatively limited across Ghana. Blu currently provides coverage in/ around Accra, with Surfline providing coverage in/ around Accra and a small number of other areas. MTN provides somewhat wider coverage across every regional capital and several larger cities/ towns.

MTN is the dominant player in Ghana’s mobile market. Its Ghanaian operating company is 98% owned by MTN and 2% owned by private investors. It is understood to be preparing for an IPO during 2017 to satisfy ownership conditions around its 4G licence (which required a minimum of 35% of local ownership). It is the leader in 3G subscriptions, having nearly 63%, and also has a significant proportion (38%) of the small 4G market despite launching less than a year ago, with its major 4G competitors having launched in 2014. MTN has invested heavily in 3G and 4G coverage, as well as metro and national fibre projects.

Vodafone is the second largest MNO in Ghana, having ~22% market share. It is 70% owned by Vodafone Group and 30% owned by the Ghanaian government. It has a significant proportion (~31%) of the 2G market; however, in line with the overall market, its 2G subscription numbers have been slowly falling during the past year. By contrast, it has a relatively small share (10.7%) of the 3G market. Vodafone and Afrimax have a strategic 4G partnership in several other countries and it was believed that they would seek to establish the same in Ghana. However, in early 2017 Vodafone publicly confirmed that no such partnership existed in Ghana and it is understood that Vodafone has sought to partner with Surfline on 4G but that this was prevented by the NCA due to lack of available regulation addressing such partnerships. In early 2017 Vodafone launched its Fibre To The Home service.

Airtel is owned 75% by Bharti Airtel and 25% by Ghana National Petroleum Corporation (GNPC), following the acquisition of Zain in 2010. Relative to MTN and Vodafone it has small market shares in both 2G (16.6%) and 3G (6.5%). It has been seeking to drive the penetration of low cost smartphones and dongles to ensure that customers have affordable access to 3G and data services - with the key objective of growing non-voice revenues. For some time, there have been rumours that Airtel and Tigo are discussing a potential tie-up/ joint venture, which could result in a combined company that would leapfrog Vodafone to occupy second place in the market. A recent press release from Tigo states that agreement has been reached and joint ownership of the merged organisation will be established, subject to regulatory approval.

Tigo is 100% owned by Millicom but is in discussions with Airtel (see above) to create a combined organisation, subject to regulatory approval. Its overall market share of 10.5% is largely founded on a relatively large 16.5% share of the 3G market, given its small 6.6% of the 2G market. Tigo has been investing in its 3G network, including a move during 2017 to dual carrier HSPA+ across key cities. It reports subscriber growth has been driven by service packages including the lowest on-net standard tariff, unlimited internet access packages, Tigo insurance and Tigo cash.

Glo has a very small market share of 2.2% which has steadily fallen from ~6% three years ago. It is fully owned by the Mike Adenuga Group, a privately-owned Nigerian multinational telecommunications company headquartered in Lagos that is heavily focussed on delivering data services, based on previous investment in building an US$800m high-capacity fibre-optic cable, known as Glo-1, from the UK to Nigeria. Glo has recently closed several of its outlet shops and cell sites, in particular areas of the country, and it is not clear how it will reverse its recent fortunes in the market.

Expresso is a CDMA operator offering both 2G and 3G services, through 1X and 1X EV-DO. It has a very small market share of 0.3% which has steadily fallen over recent years having peaked at ~5% in 2003. According to publicly available information, Sudan Telecom (Sudatel) – which owned 100% of Expresso – sold the operator to an un-named buyer in 2016. More recently, the NCA has been reported as considering revoking Expresso’s licence given its decline and financial problems.

The regulator – the National Communications Authority (NCA) – was established in 1996 to licence and regulate communications activities and services. The Electronic Communications Act is the primary piece of legislation providing for the regulation of electronic communications, the regulation of broadcasting, the use of electronic-magnetic spectrum and for related matters.

Most recently, in early 2017, the NCA requested that the MNOs improve Quality of Service following its measurement of poor QoS relating to dropped calls, voice quality and data speeds. The MNOs were given one month by the NCA to respond with a strategy to address the issues. The NCA requested that the MNOs focus initially on the Accra-Tema Metropolitan area, and then seek to roll-out solutions across wider Ghana.

In mid-2016, the government approved regulations establishing an Interconnect Clearinghouse (ICH). This requires operators (national and international) to connect their networks through a centralised third party. The NCA believes that the ICH will address interconnection capacity issues, resolve interoperability issues, and settle issues around call data records that have led to high interconnect debt rates. This latter issue was highlighted in 2014 when MTN terminated its interconnect agreement with Expresso over its inability to settle its payments. Interconnect rates are to remain static until early 2018 although the NCA noted that the operators may look to pass any additional costs associated with the NCA on to consumers. The first ICH license was awarded to Afriwave Telecoms.

The Ghanaian government has produced a set of ‘Guidelines for the Deployment of Communications Towers’ intended to balance concerns around health, aesthetics and safety with the need to improve network coverage and quality. One element of the guidelines requires that colocation must have been investigated and shown to be technically infeasible before any new tower is built within 400m of an existing tower. This is understood to have helped drive colocation revenues in recent times, but is also potentially one source of the QoS issues discussed earlier.

The Ghanaian government is supportive of infrastructure sharing and, through its ‘Guidelines for the Deployment of Communications Towers’, has sought to drive its use. The major operators have also embraced tower sharing and, through portfolio transactions, have helped establish three large, independent towercos.

In 2010, Tigo created a joint venture with Helios to manage 750 sites, with the deal including build-to-suit. In the same year, Vodafone signed a deal with Eaton Towers for the outsourced operations and colocation management of ~700 towers. A year later, in 2011, MTN concluded a transaction with American Tower Corp (ATC) for the sale and leaseback of ~1,900 sites to a joint venture, TowerCo Ghana. ATC holds a 51% stake in TowerCo Ghana’s holding company, with the remaining 49% stake held by the MTN Group. In late 2015, Eaton concluded a sale and leaseback agreement with Airtel for ~500 sites. Expresso and Glo retain their respective portfolios. As such, it is estimated that over two-thirds of the market is in the hands of the three towercos; with ATC currently having around 2,200 towers, Eaton ~1,200 and Helios ~750.

Much of the market’s growth focus has been in urban areas, and on interconnecting road routes, and the 400m rule has driven good levels of sharing on the towercos’ sites located in these areas (LUR’s towards, and in excess of, 2). Rural coverage extension has been of a lesser priority for the MNOs. ATC’s portfolio clearly has the largest reach and, in particular, provides rural coverage that the other portfolios do not match. With that, it is difficult to see the towercos’ undertaking much new build in rural areas, as it will be difficult to get additional tenancies beyond the anchor.

It may be difficult for the market to support three towercos in the future, which has led to expectations of consolidation. No public announcements have yet been made as to any potential consolidation, although it is understood that Helios has actively examined its options.

The driver for growth going forward is expected to be increasing data consumption, rather than increased market penetration. The continued development of 3G and 4G networks is therefore expected to drive further site requirements. Urban areas will continue to be the focus, although coverage extension will continue slowly. The regulators attention to quality of service will add further weight to the deployments in urban areas, with the 400m rule implying that much of this growth will be through colocations on towerco sites.

Whilst there is expected to be good growth in colocations, therefore, it is likely that there will be some consolidation between the towercos. The timescales for this are not yet clear.

It is also not clear how the situation with the 4G-only licensees will map out. They have only launched limited networks (in coverage terms) and the expectation has been, for some time, that they will partner with, or will be bought by, the larger MNOs. MTN’s progress on 4G, and the limited options that Vodafone and Tigo have in this regard, may hasten an outcome.

Overall, there continues to be good opportunities for growth for the existing towercos, with little room for further competition.