In February 2013 Ghana issued three new broadband wireless access licences to three local companies: Surf Line, Gold Key Properties and G-Kwik. Costing $6m each and initially valid for 10 years, after which time they will be subject to a renewal fee, the licences were allocated for long-term evolution (LTE) spectrum in the 2500-MHz to 2690-MHz band. They also come with the stipulation that the licensees launch commercial 4G services by November 2014, with a medium-term requirement that 50% of the country’s districts are covered via 4G within the next five years. Until that threshold is met, the licensees are limited to offering data-only services and will not be able to compete with the six existing mobile operators on voice services, essentially precluding the launching of voice over LTE, circuit-switched fall-back and simultaneous voice and LTE for a five-year window.
The introduction of LTE is significant for the market, as it is one of the first full-scale commercial deployments of a 4G network within the entire region. Upon initial roll out, as expectations are that the networks will first cover the capital before expanding to other parts, consumers who purchase 4G LTE plans should be able to enjoy peak download speeds of up to 299.6 Mbps and upload speeds of up to 75.4 Mbps, rates that are approximately 10 times faster than the 21.6 Mbps maximum Ghanaian operators are currently advertising.
A Smart Move?
The introduction of LTE will undoubtedly bring about enhanced speeds, as well as new capacity, to the country’s wireless data network. Some, however, question whether there is a dramatic need and commercial case to be made for such advanced technology in the immediate term.
According to the Europe-based GSM Association (GSMA), as of 2012 Ghana had assigned a total of 330 MHz of mobile spectrum, only slightly below both Nigeria (363 MHz), which has a much larger population, and South Africa (340 MHz), which has both a larger population and far greater demand for data per capita. “LTE is really only needed in densely populated neighbourhoods where 3G is experiencing too much traffic, resulting in poor network quality. 3G coverage is perfectly adequate for Ghana for now,” Leo Skarlatos, former CEO of network solutions provider K-Net, told OBG.
Ghana’s operators began rolling out 3G services in 2009, and for the time being most data usage has occurred through USB fobs or data cards. According to the GSMA, in 2012, 78% of internet browsing was done via a desktop computer. “To properly utilise and appreciate data one needs a smart-phone,” Lucy Quist, managing director of Airtel, told OBG. “These devices are not cheap and are out of reach of many people. This makes even 3G a long way off from reaching critical mass. The 4G-enabled phones are even more expensive and less prevalent in the market, and I do not see 4G as eroding the share of 3G anytime soon,” she said. Indeed, smart-phone penetration in 2012 was at 18%, according to a report by market research firm TNS global.
“4G will be a niche segment – even 3G has not matured yet – and 90% of Ghanaians have feature phones that are incompatible with 4G,” Haris Broumidis, managing director of Vodafone, told OBG.
Kenya-based iHub Research lists Nokia as Ghana’s top mobile phone manufacturer with a 46% share of the market in 2011, followed by Samsung and Sony Ericsson, with the higher-end phones under brands such as RIM, HTC and Apple enjoying lesser share due to high purchasing costs.
On The Money
While mobile internet browsing is on the rise owing to the arrival of more and lower-priced internet-enabled phones hitting the market, according to Praveen Sadalage, the managing director of BusyInternet, “Most smartphone users are not properly navigating the internet, but simply using some basic apps. Serious internet usage still happens on a desk or laptop and this is where higher speeds are sought,” Sadalage explained.
In part, this is a result of a lack of tailored content and services that require heavy bandwidth usage or would otherwise result in large volumes of activity. Currently, mobile banking – which has been rolled out in a number of African markets, to varying degrees of success – has yet to hit the same growth levels seen in East Africa, for example.
According to the CEO of the Chamber of Telecommunications, Kwaku Sakyi-Addo, the lack of traction for mobile money services – as compared to markets such as Kenya, for example – has been partly a regulatory challenge. This could be set to change, however, as the central bank reduces barriers such as the requirement for an operator to have on board a minimum of three banking partners. “But industry has also gotten it wrong, using generic marketing campaigns that created awareness that mobile money is being offered, but did not properly inform consumers how to actually start using the service,” SakyiAddo added. Airtel’s Quist and K-Net’s Skarlatos both also attribute the slower uptake to a broader lack of awareness. Skarlatos highlights the need for a paradigm shift towards people becoming accustomed to making digital transactions, and Quist is confident that “once people actually try out mobile money, they tend to appreciate the utility as there are numerous practical applications”.
In addition to the initial outlay of $6m, the three new licensees, notwithstanding the reasonably high level of available infrastructure for leasing, will need to make substantial network investments of their own before launching commercially. The roll out of 4G in any country is a capital-intensive exercise, but could prove particularly tricky in Ghana given the high cost of lending – interest rates regularly exceed 20% – and the need to maintain a majority domestic shareholder as per the licence agreements. “If the initial licence price combined with the cost of deploying the networks becomes too much for the new operators to bear, ultimately they will have to pass this cost onto customers which could limit the uptake of 4G and make it unaffordable for small and medium-sized enterprises (SMEs),” Jackson Gomashie, IT manager at iBurst, told OBG. However, these hurdles have not prevented at least one of the operators from launching its service in Accra and Tema. Surfline, which local media reports have said spent roughly $100m during the lead-up to the launch, unveiled its service in August 2014. The company, which partnered with France’s Alcatel-Lucent, has roughly 300 cell sites around the capital and Tema.
More spectrum could be on offer once the country fully migrates from analogue to digital television. In accordance with guidelines set out in 2006 by the International Telecommunications Union (ITU), of which Ghana is a member, broadcast stations are expected to make the switch from analogue to digital platforms by June 2015. Because digital television uses up spectrum far more efficiently than its analogue counterparts, the technology switch frees up excess spectrum that can then be re-allocated to telecoms operators.
Digital dividend spectrum, which comes at the lower frequency 700-MHz to 800-MHz band, is considered the ideal complement for covering rural areas that require proportionately less spectrum and would also reduce the amount of new towers needed to be constructed to roll out the service.
Making the switch from analogue to digital broadcasts is a major endeavour, and for the time being, meeting the deadline does not look very likely for Ghana. Gareth Townley, managing director of Eaton Towers, is sceptical that the deadline will be met, explaining to OBG that “60% to 70% of the population would not have TV for a considerable time as they wait for the digital receiver boxes to be subsidised and made available. This would prove unpopular in an election year.”
Over the long term, as smart-phones become cheaper and more powerful, and as Ghanaian consumers and corporates become increasingly heavier data users, Ghana’s early foray into 4G should prove beneficial for the country. The discussions over exactly how to allocate spectrum and licence subsequent activity in the most effective manner is not a unique occurrence to Ghana. Indeed, as evidenced by debates in the US over consolidation and new licensing, regulators the world over are now faced with the quandary of how to optimally allocate spectrum and strike a balance between supporting new entrants into the sector, maximising state revenue.
The fact that 4G licences have been issued is a welcome move towards the sector’s advancement, and it is now up to the industry to adapt.
“The existing operators have infrastructure that the 4G players lack, and vice versa as the 4G players have the licences we have sought after. The hope is that we now can all work together to gain the most out of what is available,” Airtel’s Quist told OBG.
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