In 2017, Bharti Airtel merged with Millicom’s Tigo in Ghana to become the country’s second largest mobile operator despite fierce competition from South Africa’s MTN and Britain’s Vodafone.
The merger, the first of its kind in Ghana, was a bid to increase its share in the West African countries where mobile phone use is one of the highest in Africa and competition for 37.4 million mobile phone users.
Although MTN dominates with 47.5% of subscribers in West Africa, the merger between Airtel and Tigo definitely increased their share of the subscriber’s cake.
The National Communications Authority (NCA) granted conditional approval for the merger in September, following an agreement in March by the two companies to combine their operations.
According to the NCA, AirtelTigo will serve around 10 million subscribers with revenues close to $300 million.
At that time, AirtelTigo had more than 10 million subscribers, overtaking the country’s number two operator, Vodafone. Unfortunately, despite the hyped synergy play, and the government’s efforts in advancing MTN using antitrust instruments, AirtelTigo continued to bleed subscribers, burn through shareholder loans, pile debt, and made losses.
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Extended negotiations between the government and AirtelTigo’s parent companies focused on resolving non-shareholder liabilities (like local loans). Ultimately, the government took on some of these debts, leading to the multinationals’ exit in 2021. Despite lacking a detailed public report from the ministry or access to audited statements, it’s known that these liabilities have risen since then.
Acquired by government; a final lifeline?
On April 20,2021, the Communications Minister, Ursula Owusu-Ekuful disclosed that, government had acquired all shares in AirtelTigo for USD 1.
According to her, the state of the company at the time and the circumstances under which the shareholders decided to leave the market accounted for the acquisition at that amount. She further stated that the government had negotiated many of the load facilities the company had entered into.
“We are working closely with the ministry of Finance in all the negotiations so far and they understand what it entails. Now the shareholders of AirtelTigo are not passing the shareholder loans which they’ve advanced to the company. That is one of the main things hurting the balance sheet of the company“.
How Hannam Investments comes into AirtelTigo’s story
In November last year, the Ghanaian government proudly announced a “joint venture” between struggling state-owned telecom AT and Hannam Investments, promising to transform AT into a world-class operator.
However, concerns remain about the deal’s details and potential benefits.
Looking at a brief background of the Hannam, the owner Ian Hannam is a former special forces soldier turned aggressive investment banker known for high-risk deals and a colourful personality.
Despite a scandal and fine in 2012, he continues pursuing risky ventures in challenging environments, now through his own firm Hannam & Partners. Despite his tough negotiating reputation, Hannam has also been described to be quite charming when is required. In the past, he has hosted influential figures like David Davis on lavish trips to build rapport. His ability to connect with the head of the Ghanaian communications ministry highlights this side of his personality.
Why the calls for more evaluation of Hannam’s purchase of AirtelTigo?
Should the reported valuation and deal structure of $176 million with 85% controlling stake in the joint venture in exchange for $150 million of turnaround investments be accurate, this venture mirrors Hannam’s previous ventures, where he secured significant control through strategic investments. ‘
Further analysis is needed to evaluate the fairness and potential outcomes for all involved.
The deal has been met with some criticisms on several bases including a lengthy piece by prolific economic commentator, Bright Simons that highlights the “murky” details. Notable among these include;
1. Lack of transparency
Bypassing competitive bidding has become increasingly common in Accra, raising concerns about the selection of Hannam Investments for the AT deal.
While the deal highlights a “cleaned up” AT free from past debt, it raises alarming questions about fairness, transparency, and potential costs borne by the Ghanaian taxpayer. This deal demands closer scrutiny from watchdogs and analysts.
2. Undervalued assets
The current deal to sell state-owned telecom AT to Hannam Investments values each subscriber at a mere $26, which raises concerns about fairness and potential losses for Ghana.
According to Bright Simon’s blog about the deal, in 2006 when MTN came to buy Areeba, the implied price-per-subscriber was significantly higher at $745. In 2009 when Vodafone entered Ghana, the implied subscriber value was $710.
In 2010, Bharti Airtel, through its African vehicle, acquired Zain’s subscribers in Ghana at an implied unit valuation of $267. A more recent example is the Telecel acquisition of Vodafone Ghana’s assets in 2022, it impliedly priced subscribers at roughly $67 each.
3. Compliance with the law
A potential loophole exists for further review of the deal. Since Hannam Investments is foreign-based, the transaction, even if structured through a local shell company, might require parliamentary approval due to a Ghanaian law mandating such for major international deals.
If Parliament exercises its oversight power as outlined in the constitution, Hannam might need to rely heavily on his negotiation skills to navigate the scrutiny of committees investigating the potential favouritism involved.
Despite the intricacies surrounding the background and history of AirtelTigo, there will be a need for government and interested stakeholders to have a double look into the transaction to make sure the best possible deal is made and subscribers are protected and not exploited.