The role of telecommunications in Ghana’s economic growth

Tuesday May 17, 2011, was World Telecoms and Information Society Day (WTISD).  The UN General Assembly proclaimed May 17 as World Information Society Day by resolution 60/252 on March 27, 2006.

Commemoration of the Day is meant to help raise awareness of the possibilities that the use of the Internet and other information and communication technologies can bring to societies and economies, as well as of ways to bridge the digital divide.

It is important for Ghana, and the rest of sub-Sahara Africa (SSA), to take a few minutes to review the impact that telecommunication technology has had on the lives of their citizens and figure the way forward.

Currently, with over 75% SIM card/mobile phone penetration in Ghana, the country can confidently say that the mobile industry, (still in its early days), has been one of the industries that has significantly impacted the life of the everyday Ghanaian.

Gone were the days when the only place Ghanaians could make or receive calls was the nearest post office.  The transformation in the telecoms industry casts the post office era in really obsolete terms considering that there was no privacy as the people in the exchange room and those waiting outside the booth could hear everything that was being said.

The situation however improved when fixed lines became fairly common in the country with government institutions and the well-to-do having phones.  Even then, access to fixed lines was limited because of the cost involved in getting connected to the service and how long it took for one to be connected after all payments have been made. Inadequate infrastructure of the then Ghana Post and Telecoms Corporation (P&T) made it impossible for the company to service all those who could afford to have fixed lines at their homes and offices.   As of December 2010 the number of fixed lines in Ghana was 277,897 less than 2% of the number of SIM cards in the country.

When mobile telecommunications was first introduced in Ghana in the early 1990s, it was perceived then by Ghanaians, telecoms companies and investors as a preserve of the rich. American investors particularly were very skeptical of the prospects of mobile telecommunications in Africa. There were those who cited the fact that Africa was finding it difficult feeding its people let alone having money to spend on mobile phones. What they failed to acknowledge was the infrastructural deficit in Africa (Re: Fixed lines) which made mobile telephony ideal for the African environment. When products are developed or introduced to solve very important problems, those products thrive and blossom. It is not surprising then that the telecoms industry is one of the fastest growing industries in Africa.

The impact of telecoms on the lives of Ghanaians is evident in business, religion, education, healthcare, agriculture, security and social life. From the businessman in suit to the farmer in Krachi, business is conducted daily using the mobile phone. These days, rural traders can check commodity prices on their phones via Esoko (a pricing information platform) or simply by calling their colleagues in other markets.

The Ghanaian abroad is able to call family members in villages across the nation without having to go through a third party. The impact on the media landscape is evident as reporters are able to report news as it happens and private citizens are able to call and text their views to media houses. Telecoms has contributed significantly to the increase in Ghana’s GDP over the last two decades and the prospects for the future are much greater than what we are currently witnessing.

What is the way forward?

As the industry grows and competition becomes more intense among the operators, Average Revenue Per User (ARPU) (a very important indicator in the industry) has been going down in the last few years. The primary reason for the declining ARPUs over the years has been the competition in the industry and the need for operators to reach rural communities whose ability to pay are a lot lower than the urban dwellers hence the need to price products at levels that accommodate this group of users. With the imminent launch of Globacom, ARPUs can only go down some more. With the current trend of declining ARPUs the focus is shifting from ‘voice’ products to Value Added Services (VAS) and data – non voice products.

Kenya’s Safaricom (Vodafone) has proven that mobile money (M-PESA) and data provide very important areas of growth – non voice products contributed about 25% of total revenue of the company last year. Mobile money and data products in Ghana are just getting ready to take off in very significant ways and the telecoms companies need to strategize in order to maximize the revenues from these and other innovative non voice products.

In Ghana, there seem to be little differences among the strategies being pursued by the various telecom companies. Sometimes I think the operators’ conceptualization of Ghana’s telecoms industry is astoundingly narrow.  In fact, this precludes them from broadening their product offerings and delivery to maximize their revenues.  Their approach is no different from the airline company that viewed itself as being in the airline industry rather than the transportation industry. According to a BMI report, internet penetration in Ghana was 6.4% as of December 2010 leaving over 93% of the space unexploited. With the landing of Glo 1 (by Glo) and WASC (by MTN) in the country, it is likely that the “data fight” is about to begin.

It is puzzling how the telecoms companies are doing their competitive analysis.  The companies must broaden their horizon and lump the over 100 ISPs as part of the competition, so they have right context to roll out offerings and solutions that maximize their revenues while spurring their profitability. There are potential partnerships that can be forged between telecoms operators and potential competitors in order to avoid future competition and also boost revenues and these opportunities should be pursued.

Just as mobile phones came to address the infrastructural problems Africa had with fixed lines, mobile money (m-payment) is a product that addresses very important needs of Africans and their governments.

The high cost of banking services in Africa has led to many Africans not being able to enjoy the simplest of banking services. Unfortunately the financial institutions are not in a hurry to deploy their services in rural areas, and rightly so because the population and the number and types of transactions performed by our rural folks do not justify such investments. Mobile money is a product that addresses the problems of the very large unbanked population.

When fully accepted by the populace, the government’s cost of printing and minting money will be substantially reduced as people handle cash less frequently hence reducing its wear and tear. Over time, government will be able to account for a good portion of the so called “underground economy”.  The benefits to government and companies are endless; companies and government can eliminate dependence on paper money for petty cash transactions which are bedeviled with fraud by depending on mobile money which leaves trails for auditors.

For the ordinary Ghanaian, mobile money will be the best substitute for the debit card as one will be able to perform most transactions (paying for a cab ride, paying at most merchants-POS, paying your bills, ordering your pizza and even withdrawing money from the ATM) using the phone. Mobile money when adopted fully will make life a little more comfortable for mobile phone users – there will be no need to drive in traffic only to go and join a long line, deal with the bad attitudes of customer service reps before paying ones’ bills.

The problems addressed by the introduction of mobile money are numerous, just as the mobile phone, mobile money is here to stay. The doubters out there must join the mobile money train before it’s too late. For the various heads of the mobile money and marketing departments of the telecoms companies; flashy TV and radio ads are good but should not form the bulk of the mobile money marketing drive.  It is important for the telcos to TEACH people about the product through one-on-one interactions. These people will then teach their close associates and family members, and the trend will continue. This approach is very important because of the type of product mobile money is; even the more educated urban dwellers do not appreciate the product yet.  So how does one expect the rural dwellers to adopt the product without being taught about it? This is a product that is well suited for a ‘pull marketing’ approach.

Government and the financial services industry (particularly the banks and savings & loans companies) must join the telcos in the development, the perfection and the marketing of the product since they are stakeholders and will benefit immensely when the product is widely adopted.

The mobile phone should no longer be viewed as a status symbol or equipment for talking but rather as a tool for development and lives depend on it – literally.

By Prosper Acquah

Email: [email protected]