Can Telecel survive the market leader’s dominance? — Asks Charles Benoni
Vodafone Group Plc (Vodafone) has completed the sale of its 70 per cent shareholding in Vodafone Ghana to Telecel Group.
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This was after the telecoms industry regulator, National Communications Authority (NCA), gave its green light for the sale after certain conditions were met.
The transaction has received agreement from the Government of Ghana, which will retain its 30 per cent minority shareholding in the second biggest telecom company in the country by way of market share.
Telecel is on record to have said that it intends to use the Vodafone Ghana acquisition as a launch pad to the capital markets to raise funds for its operations in Ghana.
Although the final deal amount is not disclosed, earlier suggestions indicated that the transaction was a $500 million all-cash deal and forms part of Telecel’s expansion strategy into Africa.
Industry as it stands
Telecel comes into the market at a time when fierce competition in the sector which created a lot of excitement has dwindled to its barest minimum, but with MTN still in the lead with the biggest market share by way of voice and data subscriptions.
Figures from the NCA indicate that mobile voice subscriptions in the country as at November last year stood at 40,311,341, representing a penetration rate of 127.11 per cent.
Of the figure, MTN Ghana is leading with 26.7 million subscribers, representing 66.24 per cent of total market share.
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They are followed from a distance by Vodafone with 7,591,239 subscribers, representing only 18.83 per cent while AirtelTigo has 6,018,832 representing 14.93 per cent.
In the same period under review, mobile data subscriptions stood at 23.82 million with a penetration rate of 75.11 per cent.
MTN still leads that side of the business with a whopping 17,659,162.
Vodafone and AirtelTigo follow with just 3,288,658 and 2,873,180 respectively.
In the mobile money space, the Ghana mobile money market size reached US$ 121.8 billion in 2022.
Again this sector is dominated by MTN, making the entire terrain a major mountain for the Telecel to climb.
Aside its dominance in the market, MTN Ghana continues to defy all the economic headwinds to record profits in all aspects of its business.
Arguably, the market leader has not got the best of services and products as compared to its competitors. However, it continues to use its financial muscle to keep its competitors at bay.
The company, from afar, is seen as one that is always consistently watching what its competitors do and probing to know what its customers want. No wonder it was the first to acquire a fourth generation (4G) licence with the intention of acquiring the 5G when made available.
In a year when macroeconomic headwinds had made the business terrain more difficult, with the economy in its worst state in decades, MTN still demonstrated resilience and managed to deliver a 28 per cent increase in service revenue to GH¢9.9 billion.
It is one of the very few, if not the only listed company, which makes its local shareholders smile every quarter because it declares dividends even when its share prices tumble.
All these prove the resilience of the market leader no matter the economic environment.
The other players in the industry look lame, particularly AirtelTigo, because it is now owned by the government, which does not look likely to inject any funds into the business. It did same with Vodafone, because although it owned 30 per cent stake, it never contributed a dime to the kitty to enable the company to strengthen its operations.
Conclusion
It is obvious that Telecel will have a big hurdle to surmount if it is poised to capture a bit more of the market share of MTN Ghana.
From the look of things, Telecel, with the right strategies, stands a better chance of grabbing more of the subscribers of AirtelTigo than MTN will do for a start, before eating into MTN’s market.
This will be purely based on Telecel’s strength and innovation in its business operations; the relevance and usefulness of the products and services it offers to customers, as well as the effectiveness, efficiency and reliability of its products and services.
Telecel must be able to reach the rural areas of the country, where the market leader is, but mostly only on paper. This will require a huge initial cost, but with the increasing demand of the rural folks for telecom services, particularly data services, to do good business, the benefits will outweigh the initial losses.
The head of Telecel Group, partly-owned by French tycoon Hugues Mulliez, is quoted by Bloomberg as saying that the purchase of Vodafone Group Plc’s operations in Ghana was part of a plan to expand its African operations and go public within the next five years.
The move, when consummated, is expected to make Telecel the second player after MTN Ghana to list on the Ghana Stock Exchange (GSE).
The company is poised to pursue more deals in West Africa, with Ghana as one of its key focus.
By way of improving the quality of service, Telecel plans to install 2,000 additional towers in the country over the next two years after it starts operations in the country.
In terms of capital injection, Telecel intends to spend about $500 million in the first three years to expand and refinance Vodafone’s network across the country.
The move is necessary because Vodafone Ghana has been starved of cash by its shareholders for many years, creating a lot of financial challenges for the company which finds itself within a highly competitive market.
As to whether that will be enough, considering the fact that MTN is already spending twice that amount for this year, the market waits with bathed breadth to see how the whole exercise pans out.
In view of the gap between voice and mobile data penetration, Telecel stands the chance of making significant inroads if it concentrates its investments in providing more mobile data services at efficient speeds.
Telecel must also be ready and able to leverage the spread of the vibrant media to propagate its agenda at all times to win the hearts and minds of its subscribers.
The road will be rough but not unsurmountable if the company gets the fundamentals right and invests its finances and energy in the right areas.