ight of RGHANA

No apologies forGhana Telecom-Vodafone deal,says Kufuor

rin a rejoinder to our story ''How the British gotXGhana Telecom for Vodafone" (NA, Jan 2010),^ h a n a s former president, John Agyekum Kufuorfsays "in the matter ofthe sale of Ghana Telecom[.to Vodafone, my government owes no apology toany individual or agent in the country or outsidethe country. And definitely, no wrong was donein the matter". Below is the statement issued by hisspokesperson, Frank Agyekum.

The cover story of your Januaryzoio publication with the title''How the British Got Ghana Tel-ecom far Vodafane"\\A^ come torhe notice ofthe oiEce of former

President John Agyekum Kufuor.By this response we aim to set rhe

record straight. In order to give you andyour readers a better understanding ofthewhole transaction process, it is importantthat we state a bit ofthe background lead-ing to the sale of Ghana Telecom to Vo-dafone and the processes that other suchtransactions have gone through:

i; The privatisation of Ghana Telecomwas commenced by the previous National

Democratic Congress Government in1996. In 1997 Telekom Malaysia (TMB)paid US$38m ro acquire a 30% share inGhana Telecom. Telekom Malaysia atthe time, with their 30% share, were giv-en both management and board controlleaving tbe Government of Ghana witbits 70% shareholding to be treated like aminority shareholder.

2: The choice of Telekom Malaysiaby the National Democratic Congress(NDC) was not open to any internationalcompetitive bidding. The Parliament ofGhana played no role in the electionprocess and was only informed afterthe NDC government had concluded

transactions with Telekom Malaysia.y. Significantly, Telekom Malaysia was

unable to meet the Key Performance In-dicators for which a five-year exclusivityarrangement had been provided to it as aStrategic Investor. Consequently, whenthe Terms of tbe Contract entered intobetween the Government and TelekomMalaysia expired on 19 February 2002,the then NPP Government did not find itexpedient to renew the contract.

4: After the non-renewal of the Tel-ekom Malaysia contract and through anopen and transparent international tenderprocess, Telenor Management Partner A.S. (TMP) of Norway was selected under

721 NEW AFRICAN Uarctl 2010

a Management Services Agreement tomanage Ghana Telecom. It is noted thatat the time, the Government of Ghana didnot deem ¡t appropriate to ofFer shares toTelenor because ofthe dispute on sharevalue then ongoing berween Ghana andTelekom Malaysia. Telenor was accord-ingly contracted to help manage the com-pany with an option to acquire shares atalater date when the privatisation exercisewas reopened. After the expiration ofthethree-year management contract with Tel-enor and a further extension of one year,the Telenor contract was not renewed.

5: It is perhaps worth stating that eventhough Telekom Malaysia, at the time of

Left: President John Kufuor fights hiscorner. "No apologies," he says.

their departure, had not paid any dividendto the Government of Ghana, they soughtto price their 30% share value at nearly$ioom. This issue was taken to an inter-national arbitration and Ghana eventuallypaid ssi.im to Telekom Malaysia insteadofthe nearly sioo million that TelekomMalaysia sought to demand for their 30%shareholding.

6: In 2006 after the Government hadfully settled its obligations to TelekomMalaysia and taken possession of 100%shares of both WESTEL and Ghana Tel-ecom, the Government took a decision topartially privatise both these companies.The initial objective was to sell 66.67%shares in each ofthe two fully owned com-panies to a strategic investor in order toattract private sector capital and techni-cal expertise in the country's competitivetelecom sector.

7: The privatisation exercise wa.s as-signed to an Inter-Ministerial Committeecomprising the Ministers of Finance andEconomic Planning, Communications,the Attorney-General and Minister oflustice, and chaired by the Minister ofPresidential Affairs and Chief of Staff.

8: It is instructive to note that the Bankof Ghana provided the funding of theTransaction Advisers' consultancies forboth WESTEL and Ghana Telecom. Inthe meantime, the World Bank had madea provision under an existing commu-nication project to fund the same. Thisstep taken by the Government saved thecountry from accepting the low levelsof bids that were initially received fromthe bidders that participated in the twotransactions.

9: In the case of WESTEL, after thebidding process was officially terminated,the going price for the 66.67% shares was$65 million. Subsequent renegotiationswith the eventual winner, Celtel, undertbe direction of former President JohnAgyekum Kufuor, pushed the final priceto S120 million for a 75% holding. (Thecorresponding value for 66.67% is S106.7million.)

10: All appreciated the direction and en-coutagemcnr provided by former President

Kufuor, to the Inter-Ministerial Commit-tee in raising the final amount obtainedfor the sale of WESTEL. It is this sametype of role that President Kufuor was toplay when it came to the sale of GhanaTelecom. At the end of the official biddingprocess the amounts offered by all thethree technically qualified bidders, namelyErance Telecom, Portugal Telecom andVodacom were well below the expectationofthe Government oí Ghana (pragmati-cally targeted at $2 billion as the headlineenterprise value). Ihe highest bid was for$52om from France Teieom.

12: The negotiations with these com-panies were terminated when it becameclear that none ofthe three was willingto raise its bid to a level sufficient ro meetthe Government s expectation. Vodafone'sfinal bid of S900 million for a stake of 70%shares in G T plus a CAPEX of US$500million which included the Fibre OpticsBackbone (USs86.5 million including theVRA component) and the fees for the 3Glicense (USS28.Î million) far exceeded theoffers from all the other bidders includingthat of Telkom South Africa. Here it is tobe noted that the original Vodafone offerfor 70% equity stake in Ghana Telecomwas $700 million.

13: Before and during the negotiations,several delegations from the representativesofthe interested companies paid visits tothe minister of communications to explainthe rationale behind their bids. Some wereaccompanied by members of their diplo-matic missions in Ghana. Others werenot accompanied but these visits did notaffect the declaration of who was to winthe final bid. There was nothing morallywrong in such delegations paying courtesycalls, at their request, on the former Presi-dent either alone or in the presence of hisministers. It is very normal for diplomatsto accompany business executives fromtheir home countries to meetings withgovernment officials in the countries thatthey are based. What happened in theVodafone transactions was therefore notunusual at all.

15: Needless to say, the former Presidentwas regularly briefed by both the chief ofstaff and the minister of communicationson the processes, recommendations anddecisions that were arrived at during themeetings of the privatisation commit-

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Right of ReplyGHANA

tees. It is not surprising rhar the Presidentwas influential in encouraging the Inter-Ministeriai Committee to aim at high-er prices for the shares finally sold tothe two winning bidders. (Celtel whichbecame ZAIN, in the case of" WEST-EL, and Vodafone in the case of GhanaTelecom.)

i6: It is within the context of such hrief-ing processes that the final memo of 4 July2008 was submitted by the two ministersof communications and finance and eco-nomic planning to the former President toseek his executive administrative approvalfor the submission of the Sales and Pur-chases Agreement document to Parliamentfor debate and final approval.

17: In granting the executive approval,the former President made this memoavailable to Parliament. This memo con-tained issues on the transaction proce.sseson Ghana Telecom, levels of offers madeby participating bidders and the timing ofsuch offers including those of Vodafoneand Telkom South Africa, rhe indebted-ness and [he deteriorating circumstancesof GT, the rationale for including theNational Communications Fibre OpticsProject in the Vodafone sale agreementand the conditions thereof

18: Thus, Parliament was fully awareof the factors that led to the choice ofVodafone a.s the final Strategic Investor inGhana Telecom before that body approvedthe SPA. In the case of Telkom South Af-rica, the memo clearly stated that the sub-mitted offer by this company was lowerthan the Ghana Governments expectation. The .%0-called "superior" offer inMay 2008 by Telkom South Africa wascertainly submitted after Vodafone'sfinal offer had been accepted by theGovernment of Ghana and as wouldbe proved later on, did not meet withall the requirements demanded. Tliisalleged 'superior' oifer, when criti-cally examined turns out to be in-ferior to the Vodafone offer.

19: Different governments per-form differently according to theirphilosophies, capacities and capabili-ties and it is for posterity to judgethe work and results of legitimateregimes. Indeed, the payment ofS900 million by Vodafone for 70%equity in Ghana Telecom represent-ed the biggest single payment to theGovernment of Ghana of all time in

741 NEW AfRICAN March 2010

the history of Ghana. This sale at thetime also prevented, in all probability,che collapse of Ghana Telecom, 3 com-pany thai before the privatisation exer-cise had not produced certified auditedaccounts for four years running (2004-2007 inclusive). It can be said that in thematter of the sale of Ghana Telecom toVodafone, the Kufuor government owesno apology to any individual or agent inthe country or outside the country. Anddefinitely, no wrong was done in thematter.

British pressureIt is not true that the British governmentleaned on President Kufuor to give GhanaTelecom to Vodafone against the divesti-ture laws of Ghana. Again it is maliciousand inaccurate to describe meetings be-tween President Kufuor and officials ofthe British mission in Ghana as "secret",when such meetings are commonplace intransactions of such nature and indeed.

Vodafone, a great global player, is nowffrmly fixed m Ghana. Below: VodafoneCEO Arun Sarin

not peculiar to President Kufuor. It isnormal practice that most foreign missionshelp facilitate the entry into new marketsby companies from their home countries.Tt is therefore strange that anyone couldconsider a maiden meeting between high-ranking members of the Government ofGhana and Vodafone with members oftlie Britisli High Commission presentas irregular! A simple check through therecords will show that, during the periodin question. President Kufour undertooka trip to Portugal when Portugal Telecomwas also part of rhe remaining three bid-ders; would that also constitute influenceby tbe Portuguese government? It may beof interest to know that the South Afri-can High Commissioner ro Ghana calledon President Kufuor with Telkom SouthAfrica officials during the transactions.

It is important to note that no bidof Vodafone was ever rejected by EcobankDevelopment Corporation, the Transac-tion Adviser. What all the 17 companies,including Vodafone did, were to submitExpressions of Interest. It was after theinitial expression of interest that the sixcompanies with the best offers were short-listed to bid. By 9 November 2007, thefinancial bid of the Ifinal] three companieshad not yet been opened and the Presidentwas therefore not in any position to knowthe offer from them to be able to use thatas a basis to negotiate.

All the three final bidders (FranceTelecotn, Portugal Telecom and Vo-dacom) were made aware of the veryhigh monetary expectations thatthe nation had in this transaction.They were given three chances eachto better their initial offers andeach time they failed to com eup with any appreciable offer.You again get it wrong when yousay President Kufîior under Britishgovernment pressure "ignored orbroke ' Ghana's divestiture laws inthe sale of Ghana Telecom.

A critical look at the DIG Actshows that the President has thepower to determine the procedure

to follow in the divestiture of anystate asset. The practice in Ghana in

the past has been to allow the DIC to

I"The sale of the 70% share of Ghana Telecom to

Vodafone by President Kufuor's government wasmore transparent and accountable than the NDC'ssale of a 30% share to Telekom Malaysia in 1996."

manage the divestiture of non-functionalenterprises while other methods are em-ployed for the divestiture of operatingenterprises. Examples can be found inthe sale of Ashanri Goldficlds Company,WESTEL and the ongoing process withTema Oil Refinery. Indeed the DIC wasinvolved in the particular process as far asit is required by law and rhe records atresrro this. Your conclusion thar President Ku-fuor rejected a superior offer from TelkomSA in favour of a lesser offer from Voda-fone is not based on a deep understandingof the transaction process and is thereforefaulty in many ways.

Ir is pertinent to note that by the timeTelkom Sourh Africa entered the fray, theGovernment of Ghana had already con-cluded the deal with Vodafone. Again, aswill be proved to you Telkom South Af-ricas offer did not match up to the stipu-lated requirements.

Telkom offer not superiorBased on Telkom's own offer and calcula-tions, if an adjustment is made to the as-sumed net debt and brought up to whatwas used in the Vodafone transaction, anew equity value of sr.235 billion is reached.Based on rhis, the new offer for 66.67%would be the equivalent of $823 millionand this would include the 3G license,fibre optic network and the then proposed$150 million rural telephony network!A reverse calculation shows that for rhe

S9oom consideration chat was receivedfrom Vodafone for a 70% stake in GhanaTelecom and the assumed debt of $415million that was used in rhe transaction,the enterprise value for Ghana Telecomwas SI.7 billion. Clearly the Telkom offercould not be described as superior whenin addition they actually expected theGovernment of Ghana to invest a further$150 million in a rural telephony projectand hand it over to them free of charge!

The change in the percentage sale ofthe shares was agreed during the negotia-tions when Vodafone submitted multipleoffers between 66.67% and 80%. The valueoí the 3G license was negotiated into thesale price. These arrangements are notstrange or new, WESTEL was originallyadvertised for 66-67%, however, after ne-gotiations Celtel BV paid for 75% shares.

Further, Celtel was also offered a iGlicence for more money during the negotia-tion exercise but they declined. Such is thenature of these types of negotiations so thatyou never terminate them with the origi-nal specified conditions being maintained.In 2000, when the NDC administra-tion under President Rawlings negoti-ated the sale of additional shares of GTto Telekom Malaysia, other conditionsthat were to be included were the allo-cation of new frequencies. Many moreexamples of similar negotiations in tel-ecoms abound in other jurisdictions.President Kufuor did not hold any secret

and parallel meetings wirh any companywhose bid had been rejected and elimi-nated by the Transactions Adviser. At thetime Vodafone's bid was received the RFPprocess had ended unsuccessfully so thiscouldn't have been described as paralielnegotiations.

Furthermore, all interested parties in-cluding the three companies whose bids wererejected luere at libeity to submit improvedbids. Indeed, all the three companies, namelyFrance Telecom, Portugal Telcom and Vo-dacom submitted written or verbal revisionsof their bids which still did not meet theexpectations of the Government of Ghana.

The elimination process that short-listed six companies out of the original17 did not mean rhat altogether they [thesix] could not qualify. In fact, the bids byVodacom (which was chosen) and Voda-fone (which was not chosen) were pre-sented by the same local representative.It was therefore clear that we were deal-ing with the same entity. The TA did notshortlist Vodafone for two simple rea.sons:1. That they, Vodafone, had 50% sharehold-ing in Vodacom which was also bidding.2. That Vodacom has African experi-ence and still had the financial andtechnological backing of Vodafone andthe Transactions Adviser did not wanrto crowd out other players by short-listing both Vodacom and Vodafone.It is worthwhile concluding that the proc-es.sof chesale of the 70% shares of GhanaTelecom to Vodafone by President Ku-fuor's government was far superior, trans-parent and accountable, by any standards,than the procedure followed by the NDCin selling 30% Ghana Telecom shares toTelekom Malaysia in 1996.

The procedure followed by the NDCin 1996 did not include open tender, didnot involve the Divestiture Implementa-tion Committee and certainly did not goto Parliament for ratification-

There Is every confidence that the 70%divestiture of Vodafone would positionGhana Telecom to compete on an equalfooting with its competitors. Ghana, nodoubt, will in the foreseeable future earnmore on its current 30% shares in GhanaTelecom than it did when owning all 100%shares. We have every belief that posteritywill judge us correct. HMA

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