GT's Suitor Is Bad News

The announcement by government of an expression of interest by an Indian telecom company to acquire majority stake in the nation's prized asset, Ghana Telecom (GT), has been greeted with skepticism by the nation's telecom industry. The interest of ITI (India) limited contradicts government's previous position that the buyer of GT must be an experienced and large operator. B&FT checks revealed that ITI is a telecom equipment manufacturer that does not operate a network at all. ITI therefore falls short of government's criteria that states that the prospective investor must have at least one million fixed line and six million mobile phone subscribers. A glean of the company's 2007 annual report shows that ITI does not have the required financial muscle and the capacity to qualify as a strategic investor in GT. The Indian company's balance sheet at least for 2007 financial results is not healthy enough to partner GT in a marriage which is expected to position GT as the most preferred telecom service provider in Ghana. For instance in its 2007 results, ITI market capitalization stood around US$253 million while its turnover for the year was US$440 million. Interestingly, the amounts that had been offered by large operators like France Telecom, with vast experience were larger than both the market capitalization and last year's revenue for ITI. France Telecom offered US$5Z0 million for GT but that was flatly rejected by government which thought that US$1 billion Has a fair price for one of the nation's jewels. The question therefore is: how could ITI consider buying GT at a higher price than the last bidders? The divestiture of GT was put on hold late last year when the leading bidders could not raise their bids to match-up the government's offer price of US$1 billion. B&FT gathered that Vodacom, Portugal Telecom and France Telekom, whose bids were rejected by government last year, are still in contention to acquire the 66 percent stake in GT. B&FT further learnt that the transaction advisers, Ecobank Development Corporation (EDC) and Societe General are undertaking due diligence on some companies who have tabled fresh bids.