Economic Update

Published 21 Feb 2012

Already in the midst of significant growth, Ghana’s IT and telecommunications sectors are set to see increased efficiency and improved access following the finalisation of a new medium-term strategic plan by the industry’s regulator and the arrival of a new regional player in the mobile segment.

The past decade has seen Ghana’s IT and telecommunications sectors undergo massive growth. The mobile phone penetration rate has leaped from 0.67% to over 80% and the internet grid has expanded beyond main urban centres, local media has reported.

There are still some regions, however, that remain below the national average when it comes to basic IT services, and the rapid pace at which new technology has been rolled out has meant planning and regulations have at times been slow to catch up.

This is set to change, however, as the National Communications Authority (NCA) — Ghana’s IT regulatory body — is finalising a five-year strategic plan for the telecommunications industry, which, when implemented, should boost investment and improve IT standards. Developed with the assistance of the London-based Commonwealth Telecommunications Organisation (CTO), the strategic plan aims to achieve and ensure effective market competition, streamline spectrum regulation, improve consumer relations and accelerate broadband communications.

According to Paarock VanPercy, the director-general of the NCA, the newly developed blueprint for the industry should be of notable benefit for the sector and for consumers.

“The strategic plan developed with the assistance of CTO has helped to further crystallise our most important goals for the coming years, and it ensures that the NCA remains focused on serving all IT stakeholders, deepening competition and fostering growth and opportunity in the IT/communications industry,” VanPercy said in January. “This should in turn ensure that service providers deliver the best quality of services to consumers.”

One particular area of focus is boosting internet penetration, which stands at about 6% nationwide, among the highest rates for sub-Saharan Africa, but lagging behind North African countries.

Given the prevalence of mobile online access in Ghana – as in West Africa in general – the role of mobile operators is likely to be crucial in helping buttress this increase. As a result, the pending launch of Nigeria’s Glo as the country’s sixth mobile operator is expected to have a profound impact on customers, not only in terms of internet coverage but also in terms of services and tariffs.

Given that Glo was awarded its license in 2008, it has had the ability to establish an extensive infrastructure backbone, including more than 1500 base stations, prior to the start of commercial operations, but it will have its work cut out for it in one of the most congested mobile communications markets in Africa. Penetration rates recently topped 80%, according to data issued by the NCA in early January.

Between the five existing operators, there are 21m mobile subscribers, out of a total population of 24m, with South African-owned market leader MTN holding nearly half of the market, followed by Tigo, Vodafone, Airtel and Expresso, respectively.

Though Glo will be looking to woo subscribers from its rivals, it will be mindful that it needs to generate revenue to recoup some of the $750m or more it has invested since it was granted a licence two years ago.

Philip Sowah, the managing director of Airtel Ghana, said that Glo may struggle to compete in terms of price as far as voice services are concerned but could take advantage of opportunities in data transmission. However, while Glo may find it difficult to establish itself, Sowah acknowledges that the increased competition the company represents will put pressure on the other operators.

“What this does is it makes it more difficult to recoup the investment you are making into the market because then you are sharing the telecoms revenue with more people than before,” he said in an interview with local news website Joy Online in January.

Though the effects of both Glo’s entry into the market and the NCA’s strategic plan cannot be assessed for some time, an improved regulatory environment and a new operator will almost certainly make for a more competitive IT industry.