The Government of Ghana is in advanced talks to seal 100% acquisition of Bharti Airtel’s Ghana subsidiary, AirtelTigo in a deal worth $25 million.
In a statement to the Bombay Stock Exchange in India, Airtel disclosed that it was in advanced talks to complete the transfer of all its shares, customers, assets and agreed liabilities to the Ghanaian government.
The parties are in advanced stages of discussion for the conclusion of the commercial agreement for the transfer of AirtelTigo on a going concern basis to the Government of Ghana.Bharti Airtel Statement
“Accordingly, Airtel is voluntarily taking an impairment charge of $25 million,” the statement added.
In 2017, Bharti Airtel had merged with Swedish telecom, Millicom in a 50-50 joint venture deal to rebrand as AirtelTigo in Ghana. The deal resulted in AirtelTigo becoming the second-largest mobile operator in the country behind only MTN.
A clause included in the deal had stated that the Ghana government would have the option to buy out extra stakes in AirtelTigo following the merger.
Perhaps this was a pointer to what would eventually unfold – a 100% buy out of AirtelTigo by the government. AirtelTigo’s performance didn’t play out as expected after the merger, with the telco losing more than 4 million subscribers between FY 2019 and 2020.
This saw the telco drop behind Vodafone in terms of subscriber market share in Ghana. During that time, Airtel revealed that it would explore other consolidation opportunities in markets where it is not among the top two players.
Government Takeover: What to Expect
It seems no coincidence that Ghana government has fully acquired AirtelTigo after the country’s telecom regulator had pushed for stronger MTN regulation by declaring it a “Significant Market Power” (SMP).
MTN Ghana petitioned the Supreme Court over the declaration in September but withdrew its legal action in early October. This paved the way for the regulator to take “remedial measures” against MTN.
MTN possesses a 57% majority share of the telecom market in Ghana where it caters to almost 24 million subscribers. AirtelTigo, on the other hand, had less than half (20.3%) of the market share, serving over 8.5 million subscribers.
Ghana’s National Communications Authority (NCA) has sought to break MTN’s dominance by regulating the telco’s service charges, shared information and interconnect rate to support other operators.
Now that Ghana’s government is set to fully operate AirtelTigo, it will definitely look to enforce the NCA actions against MTN and effectively curtail the telco giant’s dominance in the country’s telecom market.
Crippling tariff caps may yet be imposed on the telco and it seems a matter of time before MTN is compelled to share technical information regarding its service operations. These will hand over some competitive advantage to rival operators – Vodafone, Glo and the government-owned AirtelTigo.
Saved Jobs but Potential Unfair Advantage for Airtel
The government takeover of AirtelTigo has effectively saved the jobs of all the telco’s current employees, at least for now. Usually, an acquisition precedes the retrenchment of certain workers due to restructuring or simply a change of ownership.
AirtelTigo had performed poorly in FY 2020 – posting consecutive losses in the past four quarters. In the latest third quarter report, the company’s total revenue remained stagnant at $16 million.
Going by the data, Airtel would have surely considered laying off some employees to offset losses incurred and cut costs. The government takeover deal came at just the right moment for such workers to retain their jobs.
However, the fact that the government will wholly run Airtel in direct competition with other operators may give the telco an unfair advantage over rival operators in Ghana. The National Communications Authority – which regulates telcos in the country, functions at the behest of the government.
That said, it is very likely that any policy changes to telecom regulations will be implemented to aid the government’s Airtel ambition.
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