Interconnect Clearinghouse to serve as firewall against fraud

When the Interconnect clearinghouse comes

The National Communication Authority (NCA) will soon be calling for public consultation on four new telecom industry license categories, one of which is the single Interconnect Clearinghouse License, intended for a number of purposes including serving as a national firewall against a number of industry frauds.

Cabinet has sanctioned the announcement for public consultation on the four license categories and currently high level industry consultation is ongoing, pending a wider publication consultation later this month to discuss the implementation timelines.

The four license categories are Unified Licenses (for all telcos to have fixed line operations), three MVNO (Mobile Virtual Network Operator) licenses, three International Wholesale Transit (IWT) licenses and finally one Interconnect Clearinghouse (IC) License.

Whereas all the four license categories are important, of key interest to industry players is the interconnect clearinghouse license.

The license would create a one-stop-shop interconnect clearinghouse where all communication within the country and from overseas into the country would go for clearance before terminating on the intended network. The spectrum of communication which would go through the clearinghouse include calls, SMS and even data communication.

Apart from linking all the telecom networks in the country at one point, the clearinghouse would also link all internet exchanges and serve as the operator that mandates all traffic as legal before that communication is allowed to continue to the intended network or customer.

Effectively, it would be the connection point between telco, ISPs, Value Added Service VAS providers/app developers and international traffic carriers.

A similar player exists in Nigeria, but it is not compulsory for telecom players in that country to connect to it. But this writer can confirm that the one being proposed for Ghana would do more than what the Nigeria one does. And it would appear that industry players would be compelled to connect to the clearinghouse in Ghana because of the spectrum of services it is intended to provide.

Very often, telcos and their VAS providers send communication (SMS, ringtones, etc.) to people who have not subscribed to such services and charge them for it. But with a clearinghouse in place, such communication would be barred from reaching people who have not subscribed to them.

It is also very common to find fraudulent text messages and or calls from overseas phone numbers and messages on social media platforms like WhatsApp, Facebook and others requesting recipients to perform some action. Responding to such messages could sometimes cost the recipient dearly.

But the clearinghouse, working as a firewall, would sieve out such unwanted messages and prevent them from entering into the gateways of the country, much less hitting any mobile network and getting to customers.

The clearinghouse would be a private telecom service provider and would also be regulated by almost the same regulations that apply to other industry players. It would be required to meet the laid down quality of service standards and other regulatory requirement and be penalized when they fail on any of those.

SIM Boxing

Ghana has been grappling with the lingering menace of SIM box fraud, where some fraudsters here and abroad route calls from overseas through the internet and terminate them through local SIM cards fitted into devices called SIM boxes. That way they create the impression those calls were generated locally, so they pay only local rates and rob the country of huge sums of money.

But to the extent that all those calls come from overseas, a national firewall, in the form of the interconnect clearinghouse would bar such fraudulently routed traffic from entering the country.

So the overseas carriers who give traffic to SIM box fraudsters to bring to Ghana will have problems if they do not use the approved routes, i.e. the gateways of the telcos and any approved private international wholesale transit (IWT) operator.

Kenya has a national firewall, which prevents calls from abroad going through unapproved routes from entering into that country. So SIM box operators do not find Kenya attractive, even though the telecom industry in Kenya is very big.

But in Ghana, the industry regulator, NCA has been pushing telecom operators to establish systems on their own to fight SIM boxing, and it has not worked so far.

NCA tried to do real time monitoring of telcos international gateways through a private company called GVG (Global Voice Group) from Haiti. But it was not clear how that was going to stop SIM box fraud, since there was no talk about the monitoring systems also working as a firewall.

But the coming clearinghouse is said to have presidential backing and is therefore a national policy, other than just a project by the NCA, to ensure sanity in the system and to also prevent fraud originating both here and abroad in the telecom space.

VAS providers

The telecom operators have been duly informed about the clearinghouse and the other licensing categories, and some of them have issues with its implications for their respective businesses. But they shy away from making public pronouncement on it until actual implementation.

However, their VAS partners seem to be very glad about the clearinghouse because the net benefits to the VAS industry in Ghana are vast.

Chief Operating Officer at TXTGhana, Eyome Ackah, who worked with almost all telcos in this country before joining the VAS industry believes the interconnect clearinghouse is a fantastic idea because it would inject some regulatory regime into the telco-VAS players relationship and also stop the telcos from bluffing the VAS players.

“Currently we deal with telcos purely on relationship and so they can decide to bluff or cut you off as a VAS player if they are not happy with you. But I believe that relationship needs to be properly regulated so that the telcos would not be able to bluff,” he said.

He noted that with the clearinghouse onboard, VAS players would just have to go to the clearinghouse for connectivity to all telcos at a go before going to each telco to talk business based on the new regulatory regime.

Eyome Ackah said the clearinghouse system is expected to inject some regulation into the VAS revenue share arrangement between telcos and VAS providers.

“Under the telcos interconnect regulations, if a call originates from telco ‘A’ and terminates on telco ‘B’, telco ‘A’ is supposed to pay telco ‘B’ a specified amount of 5Gp per every minute of that call. But with VAS, the telcos unilaterally decide what to charge and the VAS providers have no say. And they take between 55% and 70% of the revenue,” he said.

General Manager of MobileContent, Conrad Nyur said regulation under the clearinghouse arrangement is important because it promises to kill the way telcos unilaterally decide on what percentage of the revenue they took without recourse to the views of VAS providers and content owners.

“They often tell us the share they take is based on orders from their mother companies abroad. I think that is unfortunate because those mother companies do not work in Ghana so they do not know what pertains in our economy,” he said.

Nyur however believes the best purpose the clearinghouse could serve is to be a firewall against fraud, particularly the ones being perpetrated by unregistered VAS players and individuals both in Ghana and overseas, sending communications into the country without any restrictions.

General Manager of SMSGH, Alex Adjei Bram believes some of the work of the clearinghouse is already being done by telcos and some VAS providers, but the one-stop-shop clearinghouse idea is not a bad one to the extent that it would ensure sanity and organization in the system.

“We came together to form WASPAG (Wireless Application Services Providers Association of Ghana) for the purposes of self-regulating to clean up the abuse in the system, but I believe when the clearinghouse comes in the work will be much easier because it will serve to prevent any such abuses at one point and save us the headache,” he said.

Adjei Bram also believes the clearinghouse would bring organization into the VAS/telco relationship because even customers wanting to stop a service from a particularly short code or service provider would just have to go to the clearinghouse and give one instruction.

“It would also streamline several of the industry processes that otherwise involved various stages of implementation by different bodies,” he said.

Adjei Bram also thinks the clearinghouse would take care of some of the equipment some telcos invest in specifically for VAS services, adding that “when that happens the telcos will spend less and therefore feel comfortable to adjust the revenue share arrangement so that the VAS players and content owners could get a lot more of the money to share.”

He described the current VAS revenue share arrangement as “a dumper on the industry”, saying that an adjustment in favor of VAS players and content owners will be “the greatest heaven.”

Questions

Meanwhile, questions are being asked of the implications of the clearinghouse to the industry. First of all, telcos already have automated interconnect arrangement which is working fine so far, so questions are being asked as to why a telco should be compelled to a separate clearinghouse.

Secondly, what would be the cost implications of the private clearinghouse to telcos, which have already invested in their existing and effective interconnect systems – and what happens if the interconnect clearinghouse holds up interconnect fees belonging to telcos, just like what is happening in Nigeria, where the clearinghouse owes telcos?

Thirdly, an alarm is being raised that connecting all internet exchanges to a clearinghouse could mean monitoring and censoring of the internet communications including private emails, which could infringe on people’s freedoms on the internet. It brings up the term ‘North Korea’ in the minds of pundits. Some have even suggested that the interconnect clearinghouse is simply ‘evil’.

Nine Licensed Telcos in ‘little’ Ghana – Part Two

Six mobile voice/data players and three data service players with voice licenses

The second part of this article looks at whether the 4G players would also sell to multinationals, and also touches on the challenges the cedi depreciations poses to the new entrants and whether population size played any role at all in the decision to license nine telcos in Ghana.

Will the 4G LTE operators also sell?

It has been established that five mobile licenses were given to Ghanaians or companies with Ghanaian involvement, but they are now in the hands of foreigner largely. Glo is for a Nigerian, and so far it is only the BWA licenses (4G LTE operators) which remain firmly in the hands of Ghanaians. But given the kind of muscle needed to sustain a telecoms service and make it profitable in this harsh economic conditions and highly competitive market, one wonders how long the Ghanaians would hold on to the BWA licenses without the help of multinationals.

John Taylor is the man behind Surfline, and he recently said after paying US$6million for the BWA license (which he described as expensive even though NCA thinks it is cheap), he has spent over US$100million dollars to build the network to cover only Accra and Tema. And according to him, “we are still spending.” Meanwhile, he has more than 100 districts capitals in nine more regions to cover.

Unlike the other networks, which had coverage beyond Accra at the time the multinationals came in, Surfline started from scratch with coverage in Accra and Tema, with just about 220 cell sites, which makes it the biggest 4G LTE network in Africa right now. But pundits say 220 cell sites are still not enough to cover Accra, as the existing networks are each using up to 450 cell sites in Accra alone, and are still having problems providing excellent service. Indeed some Surfline customers complain of “no coverage” in some parts of Accra.

Blu is set to launch soon but it is not clear how much they have invested in building their network after paying US$6million for the license. Blu CEO Emmanuel Collision recently told journalists “we raised millions of dollars locally and invested in building our network.” Blu is still running tests prior to the launch in small communities in Accra; grow gradually to cover the whole of Accra before even thinking about going outside the capital. The reason is admittedly cost. Goldkey has not even turned on their golden key yet. They have remained virtually silent on what they intend to do with their BWA license.

Dollar Depreciations and Competition

The other challenge facing the BWA licensees is that after acquiring licenses at US$6million and investing several millions of dollars into building their networks, Ghana’s currency has depreciated so heavily just at the time they are about starting operations. This might mean they now have to make twice the effort to recoup their investment. And that is not going to be easy in the face of the stiff competition from six traditional operators and several other existing ISPs, which are already complaining of dwindling revenues. Pundits say the BWA operators must necessarily be affordable to remain competitive. But experts say that would not sit well with them, if they have to recoup the heavy dollar-based investments they have made so far. Moreover, there is another 4G LTE player, Yoomy, preparing to enter the market through a local partner. They already have an ISP license on 2300MHz frequency.

Secondly, there are not many 4G devices that would drive consumption of 4G LTE. The few 4G devices available are not affordable; and mass consumption, which means affordable devices are key to the profitability of the 4G operators. Surfline is currently giving free devices (dongle, Mi-fi and Router) for each data bundles purchased. But the limitation is they, like the other BWA licensees, are limited to data service for now. They cannot provide voice services. And so even though affordable handsets for 2.6GHz LTE do exist, Ghana’s 4G operators have no use for them now.

So the question on the minds of pundits is, would the LTE guys also sell like the other six did because of the huge cost involved in providing telecoms service, plus the pressure of competition in Ghana, characterize by seven active operators with two more to come in a relatively smaller population like Ghana?

That question is more relevant because, despite the obviously huge profitability telecoms promises, banks in Ghana have not done well in supporting locals to invest in the industry and keep Ghanaians in the mainstream. The banks are quick to advance loans to foreign companies in the industry. So there is a doubt as to whether the Ghanaians in the industry now will remain in there over the next five to 10 years.

Telco-population analysis

So effectively, there are now nine licensed telcos in a relatively smaller populations like Ghana. It would appear that the NCA and government for that matter, was more focused on raising money into the consolidated fund, than considering the size of the country’s population in awarding the licenses. They did not appear to have considered the profitability of the telcos, which would then make them able to expand and provide service even in areas that offer very low average revenue per user (ARPU). Government’s strategy seem to have been focused on quantity rather than the profitability of the investors.

But the NCA has often argued that if Ghana was not a profitable telecoms market, as some often argue, how come the multinationals kept trouping to Ghana even though there were other multinationals already in the Ghanaian market?

So more licenses have been given out with the hope that service would be expanded to the “unserved and under-served”, but that has not necessarily happened without the intervention of a universal access program run by the state-owned Ghana Investment Fund for Electronic Communication (GIFEC). The same telcos, which complain of dwindling revenues due to competition, pay one per cent of their profits every year into the universal access fund. And GIFEC claims it is investing the fund properly, but the telcos privately raise questions about the use of fund.

Figures from the Ghana Statistical Service indicates that when Mobitel was licensed in 1990, Ghana’s population was estimated at 15.04million; then Celltel came in 1993 when the population was estimated at 15.431million (plus 391,000). Spacefon came in 1995 when population was estimated at 16.23million (plus 799,000); Onetouch came to meet a population estimate of 16.644million (plus 414,000) in 1996; Westel came 1997 when population was 17.07million (plus 426,000), and Glo came in 11 years later in 2008, when populations was 22.532million (plus 5.462million).

Now there is Blu, Surfline, and Goldkey here from June 2013 when population was estimated around 26.43million. So within the 23 years from Mobitel to the BWA licensees, Ghana’s population has increased by 11.39million. So for the additional 11.39million people, there are at least six additional telcos. And all of them have licenses for nationwide coverage. And while rural coverage is still not the best, urban dwellers seem to have more than necessary number of telcos to choose from.

Other jurisdictions

Indeed in countries where lots of telcos have been licensed, some of them have licenses to cover only smaller communities rather than nationwide. In Nigeria, for instance, where the population is estimated at about 170 million, only four telcos have licenses to go nationwide; MTN, Etisalat, Airtel and Glo. There are five other smaller ones. But that is understandable in the population of 170million.

In India, the population is over 1.27 billion and they have 13 telcos, plus a few others which are limited to covering smaller communities. In fact one of the supposed nationwide coverage license holders in India, T24 Mobile has 0% market share. Recently some telcos folded up in India because of non-profitability.

United Kingdom is a more advanced economy with a population of over 64million. It has five major telcos with nationwide coverage, BT (British Telecom – fixed line service), Vodafone, EE (everything everywhere), O2 and 3 (Three). But there are 43 MVNOs (mobile virtual network operators), which are limited to specific coverage areas.

United States has four major nationwide telcos in a population of over 320 million. The telcos are AT&T, Verizon, T-Mobile, and Sprint. There is a fifth nationwide operator called US Cellular, but it is virtually non-existent. There are smaller telcos in the US, which are limited to smaller coverage areas by license. And there is hardly any complaint about dwindling revenues for telcos in the US and in the UK, because the populations are big enough to accommodate a certain number of smaller operators with limited coverage areas.

But Ghana, with an estimated population of 27million, has seven active telcos with two more yet to launch. And all have nationwide coverage licenses. It is therefore not a surprise to find telcos in Ghana complain of dwindling revenues and possible mergers. Indeed, some former officials of NCA have said in public that eventually just about four or five telcos would stand in Ghana. And that day seem to be fast approaching as more telcos get into the system and threaten to even neutralize revenues further.

India is a typical example of where telcos revenues dwindled so much, they started increasing call rates and some telcos simply folded up recently. Ghana has also started experiencing increases in call, SMS and data rates. And some argue the telcos might become a cartel as a way of surviving the harsh conditions; stiff competition, no-mercy regulator and some unfriendly citizens who cut telecom fibre and steal cables, fuel, batteries and other equipment at telcos’ base stations.

So the question still remains, that in ‘little’ Ghana with nine licensed telcos, faced with dwindling revenue, would some telcos fold up soon or merge with others as predicted – would the new entrants also sell to multinationals or partner with foreigners because of the cost of sustaining telecoms network in such harsh economic conditions and competitive market, or would the banks be bold to support the locals to survive – and lastly, with the threat of dwindling revenue, would any multinational be willing to come into Ghana and partner with startups like Surfline, Blu or Goldkey, even if any of the three want foreign partners in the future?

Nine Telcos in ‘little’ Ghana – Part One

Six mobile voice/data players and three data service players with voice licenses

In March 1992 the first ever mobile phone call was made in Ghana. It was on Mobitel, which became Buzz, now Tigo. It was then the only Mobile Cellular Licensee in Ghana. The technology then was ETACS (European Total Access Communication System), which was an analogue network, as opposed to GSM, which is digital. SMS (text messaging) was not even possible then. And the mobile handsets used to be called ‘timber’ because they were big and visible. Users could not pocket them like they do today. Mobitel gave birth to the famous Ghanaian parlance “megyena abontin na miri kasa yi”, to with “I am outdoors as I speak with you”, as opposed to talking to people from a table top telephone, which is usually indoors.

The Mobitel license was given in 1990 to a group of Ghanaians, who fronted for Millicom Ghana Limited. There was one Richard Darko, and it would also appear that New Patriotic Party (NPP) stalwart Nana Addo Dankwa Akufo-Addo was part of that Ghanaian team who got the first mobile cellular license in this country. He has always said he brought Mobitel to Ghana.

A year after Mobitel went live, in 1993 Celltel Limited (now Kasapa Telecoms Limited) was also licensed. It had a brand name Celltel, which later became Kasapa, now Expresso. The license was again given to a Ghanaian, Prince Kofi Kludjeson. It was for an AMPS (Advanced Mobile Phone System), which is also an analogous network on a frequency 850MHz. But it converted to CDMA 2000 1X in 2005 within the same frequency and remains the sole CDMA operator in Ghana till date.

After Celltel, the first GSM license was given to Scancom Limited in 1995 and they started the first GSM network called Spacefon in 1996. Spacefon became Areeba, now MTN, which is probably the runaway market leader. There were two Ghanaians who had shares in Scancom then; Richmond Kwadwo Aggrey and the late David Hesse. There have been unconfirmed suggestions that the two had majority shares, but they offloaded a lot of it to their foreign partner, Investcom, for US$150,000, which industry experts think was a pittance.

In the same year Spacefon launched the first GSM service in Ghana, the national sole fixed line carrier, Ghana Telecom also got a mobile cellular license and they later started another GSM network in year 2000 with the brand name Onetouch, which is now Vodafone. Again the license was obviously in the hands of Ghanaians – the state. But now 70% of it is in the hands of Vodafone and 30% is still with the state.

Those were the days when SIM cards cost over a million old cedis. Spacefon then sold SIM cards for 600,000 cedis (GHC60) but Onetouch, which positioned itself as a prestigious and elitist network, sold a SIM card for 1.2million cedis (GHC120) then. This was without any air time preloaded. Just the SIM card cost that much. Obviously, mobile telephony was then the exclusive preserve of the rich and middle class in society. Today, however SIM cards are actually free. Even those who sell it for GHC1, give GHC1 airtime for every purchase.

Meanwhile, another Ghanaian-owned organization, Ghana National Petroleum Corporation (GNPC) collaborated with US-based Western Wireless and acquired a license for the Wireless Local Loop (WLL) and International Gateway. They formed a company called Western Telesystems Limited (Westel), which went live in 1998 operating in the fixed line and international gateway sector. One Ghanaian telecom expert, David Poku was instrumental in the setting up of Westel. Ghana government later bought the company and obtained a GSM mobile license. But no GSM service started until another multinational, Mo Ibrahim’s Zain acquired 65% shares of the company and started the GSM service. Zain then sold its majority shares to Bharti Airtel, which now operates the Airtel brand in Ghana.

Eleven years after Westel started; in 2008 another GSM license was given out, but this time to a Nigerian telecom giant, Globacom Limited. It went through an auction, and a Ghanaian company bided for it too but the cost, US$50.1million was too much for the Ghanaian so Glo won it. It took them four years to launch Ghana’s fifth GMS and sixth mobile cellular network on April 29, 2012.

So in essence, all the first five mobile cellular licenses in Ghana were given to either wholly-owned Ghanaian companies or to companies with Ghanaian involvement, except the Glo one.

All the GSM operators have since launched 3G networks in addition to their GSM operations. And the sole CDMA player has also improved to EVDO Rev A technology. But it is important to note that CDMA 2000 1X was already 3G as per International Telecoms Union (ITU) standards.

It is interesting to note that the first GSM network, Spacefon, now MTN, was also the first to go live with 3G in the country. But its 3G coverage was, for a long while, limited to the environs of its first UMTS (Universal Mobile Technology System) base station at Osu in Accra, until Zain/Airtel launched a 3G network across Accra and beyond, before the market leader stepped out of that “hen coop” of a 3G coverage area. Today, there are six networks running both 2G and 3G networks. And some have even done improvements and are advertising 3.5G (HSDPA) and 3.75G (HSPA+). But all of that came with some huge investments beyond the license acquisition fees.

Multinational Invasion

The initial multinational telecom brands in Ghana

Speaking of huge investments, it would appear that even though virtually all the telecom licenses in Ghana were awarded to Ghanaians or to companies with Ghanaian involvement, it is the multinationals, who later bought the networks that are making Ghana’s telecoms industry tick. Tigo is now 100% Millicom International baby. Investcom now owns 97.7% of Scancom (MTN). They are in court trying to kick out the Ghanaian minority shareholders.

It is important to note that unconfirmed reports have it that Investcom got majority shares in Spacefon for US$150,000 from the two Ghanaians (Aggrey and Hesse). They then got a loan from Merchant Bank (a local bank) and support from IMF to expand and later sold to MTN at US$2.5billion in a deal struck offshore Lebanon. The state got nothing substantial from that deal, except for some US$40million goodwill change that MTN offered government for a water project at Weija in Accra.

Onetouch is now 70% in the hands of Vodafone for US$900million less US$300million liabilities, and government still holds 30%. But Vodafone has always said government does not bear 30% of the operational cost and capital expenditure, even though it receives 30% of the profits. But it is also interesting to note that whereas MTN bought just a mobile operation from Areeba for US$2.5billion, government sold the totality of Ghana Telecom, including a fixed line service and a fibre optic backbone to Vodafone for the stated amount, US$900million. The deal has since been criticized as a raw one.

Westel first sold to government, then government sold majority shares to Mo Ibrahim for US$120million. He did not invest a penny, but flipped the shares over to Middle-Eastern multinational Zain for US$450million, and Zain later sold to Indian telecom giant Bharti Airtel for an estimated US$1.1billion. Another offshore deal and nothing for the state. The industry laws in Ghana do not permit the state/regulator to participate in such negotiations and tax the parties in the transaction. There have been calls for the amendment of the law but they remain unchanged till date.

Celltel Limited had allegedly sold 80% shares to Hutchison Telecoms of Hong Kong. Eventually, the company went through the hands of several layers of owners and now it is being run by Sudan Telecoms (Sudatel), even though the original owner, Prince Kofi Kludjeson still claims ownership. He insist he never sold 80% to Hutchison, and that they had a partnership agreement but Hutchison did not pay any money to him. There have been a number of court judgments which took the control of the company out of Kludjeson’s hands. But he is still in court fighting for the company.

4G LTE Era

Three LTE players licensed

Fast forward to 4G LTE; in June 2013, three wholly Ghanaian-owned companies, Surfline Communications Limited, Blu Telecoms Limited and Goldkey Telecoms Limited were given Broadband Wireless Access (BWA) licenses on the 2500 – 2690MHz spectrum band, which is suitable for 4G LTE (Long-Term Evolution). Surfline is for John Taylor. Blu Telecom is for a group of young Ghanaians led by John Hoggley and Emmanuel Collision, and Goldkey is for Kwaku Bediako.

Each of the three BWA licensees had 18 months, ending November 2014 to start operations. It is barely a month to the deadline and only one, Surfline has launched in Accra. Blu Telecoms has given indication it will launch soon, as it is currently running tests on its network at various locations across the capital, Accra, and also interacting strategically with various groups, arguably to fashion out solutions to meet specific needs. Blu has given indication it would embark on a huge advocacy for universal access to the internet and it intends to use affordability as a tool in that campaign.

But Goldkey has remained virtually silent, and it appears they will not meet the deadline. And that comes with sanctions from the regulator, National Communication Authority. The last time anything was heard about Godkey was in September 2013, when it appointed UK-based merchant banking and operational Risk Management Company, Salamanca Group as Financial Advisors, and Omnia Strategy LLP as legal advisor for the rollout of 4G LTE in Ghana this year. Beside that there is no information on the Goldkey Properties website about the company’s involvement in the telecoms business, except pockets of dead news items on a few other websites.

The BWA licensees have been restricted to offering only data services for now. They have up to five years to cover 60% of all district capitals in the country with data services before they could do voice service, if they so wish. Some of them read that to mean they have to cover 60% out the number of district capitals in Ghana. But the regulator said it means they have to provide 60% coverage in all (100%) of the district capitals in the country. That is a tall order and capital intensive.

In the second part of this article, this writer would be asking whether the LTE players would also sell to foreign multinationals or the local banks would now wake up and take advantage of the coming data boom and invest to keep the licenses firmly in the hands of Ghanaians. It would also touch on whether there is any relationship between the number of telcos and Ghana’s population growth.

Telcos data bundles offer way better value

A closer look at the various time-bound data bundles of the telcos in the country indicate even though they each have expiry dates, they give better value for money than unbundled data at default rates.

Several data customers of telcos claim they get confused about whether they are better off staying with the default rates, or going for data bundles on their respective networks. Some also say they do not understand why the telcos have placed expiry dates on the bundled data.

But Conrad Nyur, a Mobile Value Added Service provider said he is an active customer of all five GSM networks and he has data bundles on all five, which he uses to monitor how his VAS services are working 24/7.

He told Simcardblog “I could not have afforded to run data 24/7 without the data bundles. Even though there are expiry dates on the bundles, they still make absolute sense because by the time of the expiry date even if I have not consumed everything, I would still have paid way less for what I have consumed than I would have paid if there were no data bundles.”

Nyur said he therefore does not understand why some customers have issues with expiry dates on data bundles.

For those who complain that their data bundles run out faster than necessary, Conrad Nyur said every smartphone consumes data automatically once the phone’s operating system is activated. The applications automatically update themselves and they consume data so no one can accuse any telco of stealing their credit.

“There is something called a chronological timer which runs on the background and keeps checking for updates for all applications on your phone, once it finds an update it activates it for you and data is consumed. That cannot be blamed on the telco,” he explained.

A closer look at the various data bundles on all GSM networks would show Nyur is right.

Closer look

Default rate per a megabyte of data on MTN and Airtel is 10Gp, on Tigo and Vodafone it is twice that, 20Gp, while on Glo it is 8Gp and Expresso is doing 5Gp per megabyte of data.

This means if a data customer bought airtime and did not bundle any of it, he or she would be paying 10Gp for every megabyte used if that customer was an Airtel or MTN customers. If that person was a Vodafone or Tigo customer he/she would pay 20Gp for the same megabyte. But Glo data customer pay only 8Gp per megabyte with a bundle and Expresso customer pay only 5Gp for same.

But each of the data bundle categories on the various telcos offer way cheaper rates than the default rates each of the telcos offer. And even with the expiry data on the data bundle, the customer gets value for money even if he/she uses just half of the bundled data before the expiry data.

MTN’s default per megabyte rate is 10Gp, so for GHC20 unbundled, the customer gets only 200MB of data. But the highest a customer pays on a bundled data on MTN is 2Gp, and that is on 1GB (1,000MB) for GHC20 bundle. That is five times what one gets for unbundled data.

The other bundles on MTN even offer lower per megabyte rates. It is gets as low as 0.8Gp (less than 1Gp) per megabyte on the 100GB for GHC800 bundle. But that bundle is said to have no much patronage.

The default per megabyte rate on Vodafone is 20Gp, so for GHC20 one gets 100MB unbundled data. But Vodafone offers 1,600MB (1.6GB) bundled data for same price, GHC20. This means the customer pays only 1.25Gp per megabyte. Meanwhile other bundles on Vodafone even offer less prices per megabyte.

Meanwhile, Vodafone in particular offers a set of promotional bundled dubbed, Vodafone Red Packages. These offer both data, SMS and voice minutes for local and international calls for way less than what a customer would have normally paid.

Tigo’s default rate per megabyte is 20Gp so for GHC30, one gets 150MB of unbundled data. But Tigo is giving 5,500MB (5.5GB) of bundled data for GHC30, which means the customer pays only 0.54Gp (less than 1Gp) per megabyte. Tigo even have a 10GB (100,000MB) data for GHC50, which cost 0.5Gp per megabyte, the lowest rate on the market.

The default rate on Glo is 8Gp per megabyte. This means for GHC55, one gets 687.5MB of unbundled data. But Glo is offering 6,000MB (6GB) of bundled data for GHC55, and that comes of 0.9Gp per megabyte. Glo also has two other data bundles which cost 1.25Gp per megabyte each.

Airtel also has one of the highest default data rates of 20Gp per megabyte. This means for GHC60 one gets only 300MB of unbundled data. But for GHC60, Airtel gives 5,000MB (5GB), which is six times what one gets a default rate.

Surfline does not have a pay-as-you-go default rate. It only has bundles. And its bundles are currently priced between 0.45Gp and 1.25Gp per megabyte right now. Beginning from October 1, 2014, it would resume to its normal data rates and that would mean the highest rate would come to 2.5Gp and the lowest would be 0.89Gp.

Expensive

But even though telcos usually do lower prices on higher bundles, some of the telcos have slotted in some higher bundles which actually cost more than some of their own lower bundles.

Vodafone, for instance has a 3.5GB for GHC45 bundle, which comes to 1.29Gp per megabyte. It also has a 6GB for GHC80 bundle, which comes to 1.3Gp per megabyte. Those two cost higher that smaller bundles like 1.6GB for GHC20 and 2.5GB for GHC30.

Airtel also has a 6GB for GHC875 and 12GB for GHC150, which of which come to 1.25Gp per megabyte. This is higher than the 5GB for GHC60 bundle, because that one comes to 1.2Gp megabyte.

It is also important to note that, currently, the most expensive data bundle on the market is MTN’s 1GB for GHC20, which comes to 2Gp per megabyte and the cheapest is Tigo’s 10GB for GHC50, which comes to 0.5Gp per megabyte.

However, for those who would join Surfline from today, October 1, 2014 they would get half what the existing customers get for the same price, and when that happen, Surfline would then have one of the most expensive data bundled on the market, that is 1GB for GHC25.

But clearly, even though the various data bundles have expiry dates, the customer pay way less than he/she would have paid normally.

Telcos seeing result from investments in data services

Excerpts from a Business Monitor International (BMI) report on Ghana’s telecom industry indicate that while the general growth rate of the telecom industry is dwindling, the telcos are gradually reaping returns on their heavy investment into data and non-voice services.

The report indicated in the first quarter of this year ((Q1-14) the industry grew by 2.3%, which is a one percentage point drop from 3.3% in the same period last year.

It however noted that “a sharp rise in mobile data subscriptions in Q114 suggests that operators’ considerable investments in expanding data networks and non-voice services is beginning to take effect.”

According to BMI, the mobile data market grew by 25.8% in the first quarter of 2014, a drastic increase compared to 1.3% growth in the last quarter of 2013.

It noted that the drastic growth was driven mainly by expansion of network coverage by the telcos, falling tariffs and availability of low-cost smartphones.

This is consistent with the GSMA Intelligence report on smartphone growth around the world, which indicated that low-cost smartphones and affordable data packages were major drivers of data consumption and growth in smartphone connection across the globe.

Data subscriber base

Meanwhile, the data subscriber base report of the telcos published by the National Communication Authority (NCA), would show that between January and June 2014 telcos data customers grew from 12.4million to 13.9million representing some 12.55% growth over the period.

The subscriber base report also showed all telcos, except the sole CDMA player, Expresso, saw growth in data subs over the period, even though some experienced some ups and downs in the month-on-month growth.

Over the period, Vodafone had the biggest data customers’ growth of 36.6%, followed by Tigo with 29%, then Glo with 21.4%; market leader MTN was next with 4.9% growth and Airtel came in fifth with 2.4% growth. Meanwhile, Expresso saw a 9.2% decline in data customers, arguably because its one time superior data service on the CliQ modem went bad due to lack of investment.

But in terms of real figures, Vodafone was still tops with 680,993 additional data subs, followed by Tigo with 434,279 additions, MTN with 331,991, Glo with 65,780 and then Airtel with 47,998 in that order, while Expresso lost some 4,630 data subs over the period.

Meanwhile, over the period, Tigo and Glo recorded loses in overall customers, even though their data customers increased. Indeed, an increase in data customers only suggests some existing customers who used not to be data customers became data customers either through the acquisition of smartphones or modems.

MTN Ghana had, earlier this year, attributed increase in data consumption and revenues on its network to the increased in low-end smartphone connections and affordable data packages, saying that smartphone users on its network increased from 525 in November 2011 to 1.7million in June 2014.

MTN also launched a Social Bundle, which allows customers to use three major social media platforms, Facebook, Whatsapp and Twitter for only GHS5 a month.

Tigo is also very close to completing the spread of 3G coverage to all district capitals in Ghana, something MTN completed in December last year. Tigo has, on the back of the 3G spread, launched a new set of affordable capped data packages tailored to suit the lifestyles of different categories of customers.

Airtel has also invested into a 3.75G network and has been driving promotions that offer customers subsidized data and voice packages.

Meanwhile, Airtel also announced that by April 2014 more than 100,000 subscribers had signed up for its free insurance product, a non-voice service launched in January in partnership with UK-based insurance providers MicroEnsure and Enterprise Life.

“Airtel also collaborated with Ghana Post (GP) to allow Airtel Money subscribers to access services such as receiving and transferring funds, airtime top up, and payment of bills at GP outlets. That non-voice service was initially available at 150 of GP’s 350 post offices, but has since spread to more post offices,” the BMI report noted.

The network with the fastest growing data customer base is Vodafone, and that has been attributed to its Red packages, which offer various tailor-made bundles for data, SMS (non-voice) and voice minutes for both local and international calls. The various Vodafone Red packages are driving a fast growth in the second largest telcos data subs base.

BMI said telcos have been keen on sustaining mobile data usage growth that took off from first quarter of 2014, so they have sustained their respective investments in expanding their networks and service offerings.

It observed that in early April, Vodafone Ghana added 403 new sites to improve network coverage and capacity in Ashanti, Ghana, saying that In the same month, MTN Ghana announced plans to invest GHC311million (US$115.4mn) to expand and upgrade its network during 2014.

As part of that investment, MTN said it expects to install 120 new 3G sites by the end of the year.

Quality of Service

The report however noted that despite operators’ continued investment in their networks and services, quality of service issues still persist.

It explained that in mid-May 2014, the National Communications Authority (NCA) prohibited Expresso from launching any sales or marketing promotions until the end of the month, following non-compliance with the country’s Quality of Service (QoS) standards in the northern, eastern and Volta regions in February. The regulator stated there was a total outage on Expresso’s network in three regions.

The NCA further stated that Glo was the only mobile operator to offer a good quality of service (QoS) in FY12/13. MTN and Vodafone did not meet any of the regulator’s benchmarks while Tigo, Airtel and Expresso were able to meet only the overall QoS benchmark.

Risk/Reward Ratings

According to the report, for the second consecutive quarter Ghana climbed one place on BMI’s Risk/Reward ratings table. Ghana now ranks third after Nigeria and Gabon and ahead of regional heavy weights South Africa and Angola.

It said Ghana’s score improved on the back of a sharp increase in take-up of 3G services. The country’s lowest rating is still in the Industry Rewards category, where it is held back by increasing market saturation and strong downward pressure on ARPUs (average revenue per user), despite increased penetration of mobile data services.

Saturation and cedi depreciation

BMI said in light of approaching saturation in the mobile voice market, as well as continued regulatory pressure on quality of service, it is expected that the country’s telecoms operators would continue gearing investments towards bolstering network capacity.

“Although BMI expects mobile data to continue recording strong growth throughout 2014, further currency depreciation and a weakening economy is likely to weigh on private consumption levels, posing a downside risk to our positive outlook for Ghana’s telecoms market.” It said.

Over the period in question, the cedi has depreciated by almost 50% against the major international currencies, particularly the dollar and that has affected spending by all businesses, including the telcos themselves.

Even though the cedi has begun to see some relative stability, it is expected that businesses’ spending on communication and data usage would remain slow for a while before picking again.

Moreover, another recent industry report shows that elsewhere, businesses are beginning to rely more on VoIP (voice over internet protocol) like Skype, Viber, Imo, Facebook Messenger, Tango and others as the main channel for business communication. This threatens to impact negatively on voice revenues, if the VoIP adoption by businesses reaches Ghana.

Blu: Ghana’s second 4G LTE Network on test run

Blu Telecommunications, a 100% Ghanaian-owned 4G LTE network is set to go live but it is currently on test run in selected communities in Accra and Tema, prior to commercial launch any time between now and November this year.

The test run, dubbed “The Founders Campaign” includes 100 carefully selected Ghanaians from areas where Blu has coverage. They have each been given free Blu data devices and unlimited data access to try the network for 30 days and give feedback.

The areas under coverage right now are Tema, Spintex Road, parts of East Legon, and parts of Dzorwulu.

Chief Executive Office of Blu Telecoms, Emmanuel K. Collison told a select group of journalists that “the Blu network is set to go live today” but because Blu places high value on its customers, the company decided to embark on the Founders’ Campaign to allow the customer make an input into the final readiness of the network before the launch.

“We will take feedback from the Founders and give them to the industry regulator, National Communication Authority (NCA) and then inform them about the commercial launch date,” he said.

Blu would be the second 4G LTE network to have gone commercial and met the 18-month deadline for all three Broadband Wireless Access (BWA) licensees to go live in the country. The other two are Surlfine Communications, and Goldkey Telecoms.

Surfline launched two weeks ago on the back of 220 cell sites, which it said provides coverage for the whole of Accra and Tema.

But Blu comes in with coverage for what it calls “areas that have not been well served with data even though the existing telcos and some ISPs have coverage there.”

They also included areas where data service from other networks is relatively good. This is to enable customers to compare between the good service on the 3G networks and the experience on the Blu 4G LTE network.

The company plans to roll out in many more of the challenges areas as part of its expansion plan going forward.

Emmanuel Collison said Blu has deployed a complete telecom network including the core network, adequate number of cell sites for the test, a billing system, and a data center at Sakumono and other commercial and technology support functions for the network.

They also have three devices; dongles, Mi-fi and Routers fitted with Blu SIM cards ready to roll out any day from now. Like the devices from Surfline, Blu’s dongles connects one device, the Mi-fi connects 11 devices and the Router connects 32 devices at the same time.

CEO Confident

“I am proud to say that Blu Telecoms was built from scratch by Ghanaians with finance, law, telecoms, technology, Human Resource, Marketing and branding and other backgrounds, with 100% local funds. We raised millions of dollars right here in Ghana and employed local expertise to build this network,” the Blu CEO said.

Collison believes Blu’s story is evidence that Ghana still remains an attractive investment destination but very often it is the foreign investors who see the opportunities and the conducive environment in Ghana and take advantage of it while locals sat by and watched.

He said contrary to the several commentaries about how the Ghanaian economy is dipping, several reports that guide foreign investors in deciding to come to Ghana indicate that Ghana’s GDP and per capita income are going up and the political environment provides security for investment.

“Our own fundraising effort ayt Blu proved to us that investors have confidence in Ghana and the prospects in Ghana are good for every investor,” he said.

Collison is particularly happy about the fact that 100% of the money invested into Blu was raised in Ghana because “it gives us value in case we have to bring in a foreign partner at some point.”

The Blu Telecom CEO said it is not a good thing to have invested millions of dollars only for the cedi to dip heavily against the dollar just when they are about to go commercial. But he is confident that since the BWA license is for 10 years, in the long-term the investment would be recouped and the company will be profitable.

Consumer Advocacy

The Chief Commercial Officer of Blu Telecom, Tara Squire said the company will drive a strong consumer advocacy program when it goes commercial by ensuring it is at the forefront of the conversation on what suits the consumer at the most affordable price possible.

He said, as part of leading the conversion on the customers need, every one of the 100 founders selected for the initial test run will be maintained to test and give feedback on every new service and product Blu decides to launch in the future.

“At Blu we believe there is more to life and indeed more to data service than just a great internet experience. We intend to lead the way in delivering optimum network reliability plus more for the customer,” he said.

Tara Squire noted that the significant public response to the launch of Surfline was an indication that there is hunger for better quality data service and so Blu is not perturbed by the existence the many players in the market because the customer would always look for the network with great value “and we believe we have taken our time to build a network that offers more to the life of the customer.”

He believes to the extent that Blu would like to make services as affordable as possible, there is need to encourage local manufacture of some telecom implements  to enable telcos cut the import bills and save money so they can drive down prices.

Blu is likely to launch Ghana’s second 4G LTE network next month. But while the November 2014 deadline for the BWA licensees to launch draws close, the third licensee, Goldkey Telecoms remains totally silent on when it will launch the third 4G LTE network in the country.