22 March 2023

Mergers And Acquisitions In Ghana's Telecommunication Industry

It has been said that telecommunications and information technology have advanced the world beyond imagination.
Ghana Corporate/Commercial Law
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It has been said that telecommunications and information technology have advanced the world beyond imagination.The telecommunications industry, being at the heart of several homes, organizations, and institutions, is very competitive owing to its constant evolution to meet the emerging needs of its consumers. This era of digitalization has forced telecommunication companies to take steps to not only stay afloat but succeed in the face of the fast-paced evolving nature of the sector.

Telecommunication companies are turning to Mergers and Acquisitions as one of the solutions for them to thrive. A merger is the corporate marriage or fusion of two existing companies into a new company or the absorption of one company by the other. In contrast, an acquisition is the adoption or takeover of a target company by the acquiring company.

The rapid growth of wireless communications has also created an incentive for merging or acquiring telecommunication companies to acquire other companies that complement their existing strengths in the hope of stimulating corporate synergy. These companies consider merging or acquiring another company as a strategic tool to enhance their performance, however, the end is not always fruitful.

Ghana's telecommunication industry has gone through various forms of mergers and acquisitions for almost two decades - a trend that shows no signs of fading any time soon. Consequently, it has become necessary to consider some of the challenges with such transactions in the industry.

These mergers and acquisitions remain of interest as the telecommunication sector is one of the principal contributors to the economy of Ghana. In 2021 for example, the industry contributed GH¢4.3 billion in taxes to the economy. This amount represented 7.7 percent of government revenue for the period in review.

Why companies opt for mergers and acquisitions

In the United States of America and Europe, mergers and acquisitions in the telecommunication industry have been attributed to factors such as the revision of the American Telecommunications Act in 1996, a WTO Agreement in 1997, and the integration of the European Union in 1998. These events effectively removed the barrier of entry for foreign companies to operate in a specific country's telecommunications market and resulted in an increase in the rate of mergers and acquisitions as most companies seeking to acquire were foreign.

Companies get involved in mergers and acquisitions to have a competitive edge in the market, greater financial strength for both companies involved in the transaction, and greater access to new markets, to help ensure business continuity and allow a company to reach a wider market of consumers.

By engaging in a merger or acquisition, a telecommunication company enters a new market where it does not need to start afresh but will rather thrive on the back of the reputation and customers of the target company or merging companies. When companies come together, everything is maximized including assets, financial strength, and human resources. A company that may have been struggling will likely have its fortune turned around as there will be an injection of capital.

In Asia, the number of mergers and acquisitions keeps increasing because of the need to improve the return on investment in 5G mobile networks. Unfortunately, the aftermath of mergers and acquisitions is not always positive as it may lead to loss of jobs or employees, post-merger/acquisition integration issues, and customer/consumer neglect among others.

The state of mergers and acquisitions in Ghana

Ghana's telecommunication industry is no stranger to this phenomenon and has experienced 3 major acquisitions between 2006 and 2010. In the past 6 years, there has been another wave of such Mergers and Acquisitions.

MTN Ghana

In 2006, MTN Ghana acquired Scancom PLC as a subsidiary of the MTN group of South Africa. It gained two and a half million subscribers, a number that increased to four million in 2007, and doubled to eight million by December 2009.

This allowed MTN Ghana to amass large profits in just 3 years of operation. Had MTN entered the Ghanaian market as a new company, without the acquisition, such profits may have taken a significantly longer time to make as it would have been starting from scratch. To date, MTN Ghana remains highly profitable company. The company posted a profit after tax of GH¢2 billion for the 2021 financial year which represents an increase from the previous year's figure of GH¢1.13 billion.

Vodafone Ghana

Another acquisition that took place was that of Vodafone Ghana which acquired a 70% stake in Ghana Telecom from the government of Ghana in August 2008 for US$900 million. At the time, Ghana Telecom was the third-largest telecommunication company and a leading fixed-line operator. Vodafone Ghana projected the benefits would include exposure to the growing Ghanaian telecommunications market.

Vodafone Ghana after the acquisition had the number of mobile phone subscribers increase. By April 2016, the company had a market share of 21.92%. This made Vodafone Ghana rise to become the country's second-largest operator.


The next was the acquisition of the Zain group by Bharti Airtel in 2010. This move by Bharti Airtel was not peculiar to Ghana but spanned 14 other African countries and was regarded as a very attractive acquisition. The acquisition was aimed at making Bharti Airtel an emerging markets telecom operator and to be among the five largest mobile operators in the world.

The Zain group entered Ghana's telecommunication space in 2008. Nine months to September 2009, Zain reported a net loss of US$112 million against a profit of US$169 million in the corresponding period the previous year. 7 of the 15 countries had also reported losses. Zain was not doing well at the time of the acquisition and that was a factor for Bharti Airtel to consider before the acquisition.


From the acquisition in 2010, Bharti Airtel seemed to be making steady progress. In 2017, they merged with Tigo in a bid to increase their share in Ghana's telecommunication sector. They aimed to become the second leading telecommunications provider. Unfortunately, after the merger, the company became the third leading operator failing to gain a greater share, coming behind MTN Ghana and Vodafone Ghana.

It was presumed that once the merger was completed, the fate of the company would change in a positive direction. This has not been the case. In 2020, the company announced that they were leaving the country and by November 2021 their shares had been wholly acquired by the government of Ghana. Upon acquisition, the government stated that it was aware of the high capital injection required for the company and had made provisions to support the upgrade in infrastructure to give better services to its customers and work at becoming profitable.

It is worth noting that what is happening between Globacom Ghana and Airtel Tigo cannot be considered either a merger or an acquisition at this stage. Publicly available information indicates that it is an agreement between the parties to permit Globacom subscribers to roam under the former's network. Airtel Tigo has not taken over any assets or liabilities of Globacom Ghana.


The most recent acquisition in the telecommunication sector is that of Vodafone Ghana by the Telecel Group. Since 2021, Vodafone had been signaling its intention to leave the Ghanaian market. The company had indicated that it had been making losses despite huge investments in improving the quality of its service. Vodafone Ghana as the second largest operator had its subscriptions decline from 7.73 million to 7.32 million between March 2022 and June 2022.

By taking over Vodafone's assets, Telecel will need to introduce highly innovative solutions to drive subscriber growth on all fronts and succeed in Ghana's telecom space. The deal was concluded on 21st February 2023.

Mergers and acquisitions in Ghana's telecommunications industry have not been always successful. The story of such failure is not only present in Ghana but reflects what happens globally.

Challenges with mergers and acquisitions in the telecomsindustry

Among the factors accounting for the reduced success of mergers and acquisitions could be the lack of proper integration planning which summarizes how and when resources, assets, and processes of the acquiring and acquired companies will be combined to achieve the goals of the deal. This applies both operationally and culturally. The lack of consideration of the cultural differences of the companies includes the way employees work. While one company will have its staff being entrepreneurial and innovation-focused, the other company may have a more traditional and results-driven staff. Failure to provide a detailed integration plan in place when the transaction is made may lead to the companies involved functioning separately for longer than anticipated, resulting in increased costs.

Varying degrees of shareholder participation following a merger or acquisition could adversely affect growth of a company. . Such behaviour causes progress to stall as full participation is needed to make certain improvements. An example is the complaint made by Vodafone Ghana against the government of Ghana which is a 30% shareholder in the company. The company had tried, unsuccessfully, to get the government of Ghana to redeem its financial obligations to boost operations.

An overly optimistic presentation of the financials of a company can lead to the failure of a merger or acquisition. Some companies seeking to acquire or merge, pay an extravagant purchasing price for the target company and then the transaction ends up not delivering the expected benefits. Companies may not sufficiently factor in other expenses they must incur during and after the merger or acquisition such as redundancy packages, system upgrades, regulatory costs, the building and maintenance of towers, and other expenses. Such spending causes scarcity, restricting the use of the money when it is most needed. It could lead to insolvency in extreme cases.

Transacting companies must painstakingly undertake due diligence checks as certain companies may put up a good front when they are struggling financially. Due diligence covers checks concerning capital expenditure, regulatory issues, market dynamics, intangible assets, financial statement of the company, legal structure of the economy, the business, statutory regulations, list of legal cases filed against the company, partner agreement, and intellectual property regulation, the salary of employees and chances of an increase in salary, etc. Failure to conduct sufficient checks or insufficient disclosure of information could lead to the companies misunderstanding the nature of a deal, the risks involved, and whether the deal fits with their portfolio. In the end, this will lead to the total failure of the transaction.

Overestimating synergies that is, the value from the alliance before an acquisition or a merger can be another cause for a pitfall. Synergy may be hard or soft. The former is also known as cost synergy and involves cost-cutting measures and expansion strategies designed to maximize value. Soft synergy enhances the revenue of companies. A small degree of error in calculating synergy could cause the transaction to malfunction of the merger or acquisition transaction.

A significant issue in mergers and acquisitions in the sector relates to tower infrastructure. Over the years telcos have sold off or leased the maintenance and operations of the tower sites to third party entities whose main line of business is the ownership, leasing and maintenance of towers. In 2010, MTN Ghana sold its towers and Vodafone leased to different tower companies. While some of these tower sales or leases have been successful, in other cases, the cost of collocation has not necessarily worked in the interest of the telecommunication company.

If these issues are not addressed before a merger or acquisition occurs, it is likely the merger or acquisition will not be successful.

The Role of the Regulator: The National Communication Authority

The National Communication Authority was established in 1996 by the National Communications Authority Act, 1996 (Act 524). The Authority is the main regulator when it comes to the telecommunication industry in Ghana. . The Act did not provide detailed procedural guidelines for dealing with the transfer of licenses and frequency authorizations, sale or transfer of a significant interest in a network operator or frequency authorization holder, merger or acquisition of a network operator or frequency authorization holder.

In 2022, the Authority published "Guidelines for mergers and acquisitions of network operators, frequency authorization holders, and other communication service providers" premised on sections 5 and 10 of the Electronic Communication Act, 2008 (Act 775).

The objective was to have a clear regulatory framework for the industry and investors to assist parties concerned to make informed decisions on merger and acquisition activities, particularly as they relate to network operators.

Before the publication of these guidelines, there was no clear-cut process to follow. This does not put the failure of such mergers and acquisitions on the ]Authority. However, due to the lack of guidelines, in some instances, there were delays with the final approval of the transaction. Such delays, may cause the inapplicability of time bound research done in furtherance of the transaction. The guidelines as provided by the Authority will provide a framework for decision-making and enhance the appropriateness of the process.


Overall, Mergers and Acquisitions are great business tools when used right. However, like any business transaction risks have to beminimized and companies must do all the groundwork needed. A view espoused in the June 2016 issue of the Harvard Business Review on mergers and acquisitions generally, is that "M&A is a mug's game in which typically 70%-90% of acquisitions are abysmal failures", however, when done right mergers and acquisitions in the telecommunications sector can be profitable and indeed beneficial and timeous in a rapidly changing technology-based sector such as the telecoms industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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